Most people who live long enough in any house or apartment will find it begins to fill up with clutter. In your financial life, something similar can happen—and you may hardly even notice.
But take a look around your investment portfolio. Over the years, it has probably accumulated a cumbersome collection of duplicative holdings, impulse buys and investments that no longer fit your strategy or your financial situation. Cleaning house from time to time is a great idea, with the benefit that it will provide a clearer picture of your financial health.
Here are three problems that may be cluttering up your portfolio—and what you can do about each.
Investment Problem: Redundant accounts
It’s not uncommon to acquire multiple accounts over the years—401(k)s, Individual Retirement Accounts (IRAs) and multiple brokerage accounts, often spread across various firms. Keeping track of how your holdings work together can be difficult under such conditions. Worse, financial firms vary widely in what they charge to maintain each account, and all those fees can add up.
Ask yourself why you opened each account in the first place. Those with a unique goal—a 529 college savings plan, for example—are worth keeping. However, it might be time to consolidate accounts with similar purposes, particularly if they’re held at multiple firms. You might be better served by paring down providers to those with lower costs or better investment options.
Investment Problem: Overlapping funds
Some people invest in multiple mutual funds or exchange-traded funds (ETFs) in order to diversify. However, the number of funds you own is less relevant than how they work together to manage your overall risk. If you own multiple funds with overlapping holdings, you could be less diversified than if you owned a single fund with broad market exposure.
If you're a Schwab client, use Schwab’s comparison tools for mutual funds and ETFs to help identify funds in your portfolio that are redundant in their holdings and/or investment styles. Investigate whether you’re overpaying for actively managed funds that mirror, rather than outperform, their benchmark indexes.
Investment Problem: Competing advice
Two heads may be better than one, but not if they’re taking different approaches to the same goal and canceling each other out in the process. Different advisors may not always align their strategies for the greater good of your portfolio—leaving you to coordinate and guard against unnecessary fees and taxes.
Settle on one comprehensive advisor, or assign advisors discrete tasks. One might manage your short-term investments or philanthropic endeavors, for example, while another administers your retirement funds.
Just remember: Less can add up to more when it comes to managing your financial future.