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3 Ways to Simplify Your Portfolio

Minimalism has become a pop-culture phenomenon for good reason: By whittling down your possessions, you free yourself from all that unnecessary chaos.

The same is true of your investment portfolio. Streamlining a cumbersome collection of duplicate holdings, impulse buys and investments that no longer fit your strategy can provide a clearer picture of your financial health.
Here are three ways you may be overcomplicating your portfolio—and what you can do about each.

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.

Solution: Consolidate

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.

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.

Solution: Streamline

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, too, whether you’re overpaying for actively managed funds that mirror, rather than outperform, their benchmark indexes.

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.

Solution: Simplify

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.

What you can do

  • Schwab clients: Identify overlapping holdings using Schwab’s comparison tools for mutual funds and ETFs.
  • Not a Schwab client? Call us at 800-355-2162 to find out how we could help you simplify your portfolio.
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Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Charles Schwab Investment Advisory, Inc., is an affiliate of Charles Schwab & Co., Inc.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

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