Keep your portfolio aligned with your goals.

Is Your Portfolio Working For You?

Keeping your portfolio aligned with your goals should be a key part of your strategy – but therein lies the rub. Short-term changes in the market can have long-term impacts on your portfolio; sometimes, without you even noticing.

With your overall investment plan and timeline in mind, let’s take a look at a few tactics that can help you manage your portfolio and keep it working toward your goals.

  • Consider your Asset Allocation – Asset allocation refers to the percentage of your investments in specific asset classes like stocks or bonds. Some people break those classes down further to include international stocks or government bonds. Your allocation ideally would be aligned with your risk tolerance and time horizon. A portfolio with a high allocation to stocks has historically been more volatile than one with a higher allocation to bonds. As you get closer to retirement, you might shift your allocation to make it less volatile.
  • Consider Rebalancing Your Portfolio – Regardless of your asset allocation, periodic review of your investment portfolio and rebalancing, if necessary, can be an important consideration. Essentially, you want to prevent your portfolio from drifting too far from your desired allocation. This drift can make your returns suffer or expose you to too much risk for the amount of return expected.
  • Consider Dollar Cost Averaging – Many investors purchase securities on a regular basis. This is known as dollar cost averaging (DCA), and it helps ensure that you take part in the market, whether it’s moving higher or lower. If you were to invest the same amount each month, you’d buy more shares while prices are low and fewer shares while prices are high, which could lower your cost basis in a particular security.

Next Step: It can be important for you to remain engaged with your portfolio. Scottrade clients can log in and get free access to the Portfolio Review Tool, which allows them to analyze their asset allocation and determine if any tweaks are needed. If you’re not a Scottrade client, you can open a new account.

Dollar cost averaging does not assure a profit and does not protect against loss in declining markets and, because investing by dollar cost averaging involves continuous investment in securities regardless of fluctuating prices, the investor should consider their financial ability to continue purchases through periods of both low and high price levels.

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