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Blog » Personal Finance » 26 Investment Strategies to Simplify Your Portfolio and Save Money on Fees

26 Investment Strategies to Simplify Your Portfolio and Save Money on Fees

Posted on September 22nd, 2023
26 Investment Strategies

A complex portfolio filled with high fees can make investing overwhelming, but it can also grow your wealth over time. By simplifying your investment strategy, however, you can achieve better results, reduce stress, and save money.

Here, we’ll examine 26 investment strategies that can streamline your portfolio. and reduce fees.

1. Determine clear and attainable investment goals.

It’s important to set clear investment goals before you begin investing. At the same time, when you’re rushing to invest, it’s easy to lose sight of where you’re going. If you outline your investment strategy in 50 words or less, you can help prevent this.

Additionally, establishing specific, measurable, achievable, relevant, and time-bound (SMART) investment goals will also help. Here are some examples.

  • Within five years, save $20,000 for a down payment on a house.
  • Save $1 million by the time you reach 65.
  • During the next 10 years, I will grow my investment portfolio by 10% a year.
  • Every month, I save $500 for the education fund of my child.

2. Consolidate your accounts.

Many of us get monthly statements from banks, brokerages, mutual funds, and retirement plans. As a matter of fact, nearly half of American Association of Individual Investors respondents (49%) reported having two or more brokerage accounts. Therefore, consolidating as many of these accounts as possible is one of the most efficient and time-saving things you can do to simplify your finances.

Using one custodian for both investments and retirement accounts is one suggestion. In other words, if you have any “orphan” 401(k)s from a former employer, you may want to think about transferring them into an IRA or your current 401(k). By consolidating your funds, you can ensure there are no overlaps or overweights, and that you are not overinvesting in any one sector or fund. Moving your accounts to the same custodian may lower your statement number and login details if they are spread across several institutions.

In short, you should look at all your accounts as one portfolio as you review them for consolidation. As long as you diversify across your entire portfolio, you do not need to widely diversify within each account.

3. Put investing on autopilot.

Once you develop your investment policy, for example so much in equities, so much in fixed-income, you can arrange automatic periodic transfers from your bank account to a brokerage firm or mutual funds. You can also arrange automatic payroll deductions for contributions to your 401(k) and, if your plan permits, automatic escalation of your contributions.

Investing periodically is a form of dollar cost averaging. But you still need to rebalance your accounts periodically to keep to your investment policy, either through automatic rebalancing or, if this is not available, by reviewing your accounts quarterly and rebalancing them if necessary.

4. Use a robo-advisor.

You can manage a portfolio of low-cost index funds with a robo-advisor, which is a low-cost, automated investment service. It’s important to research robo-advisors and choose one that fits your needs since there are many available… In addition to your investment goals, your risk tolerance and your budget should be taken into account.

To get you started, though, here are some robo-advisors worth considering..

  • Betterment. With Betterment, you can invest in a variety of portfolios and take advantage of a variety of features. There is a low investment minimum of $100 and a 0.25% management fee.
  • Wealthfront. Betterment’s main competitor, Wealthfront, offers similar features. The minimum investment requirement is $500 and the management fee is 0.25%.
  • SoFi Invest. Investing with SoFi requires a minimum $1 deposit, but there’s no minimum account balance. You can trade stocks and ETFs commission-free, and you can even invest for free using SoFi’s automated investing system.
  • ETRADE Core Portfolios. The ETRADE Core Portfolios robo-advisor is managed by one of the largest online brokerage firms. The minimum investment requirement is $500, and the management fee is 0.30%.

5. Buy and hold.

Buying and holding is a classic investment strategy that is tried and true. As its name implies, you buy investments and hold them for an indefinite period of time. If possible, you should hold the investment for more than three years before selling it.

As an investor, you do not engage in active trading, which hurts most investors’ returns, when you follow a buy-and-hold strategy. In the long run, your success is determined by how the underlying business performs. By doing so, you will be able to find the biggest winners in the stock market, which may help you earn hundreds of times what you invested.

This approach offers the benefit of never having to think about selling. By never selling, you can avoid capital gains taxes, which can eat into your returns. Also, unlike traders, long-term buy-and-hold investors aren’t focused on the market all the time. In turn, they can devote their time to activities they enjoy instead of being tied to the markets.

6. Favor broad all-market equity funds instead of a collection of style-specific equity products.

“Experts have drummed into our heads the value of intra-asset-class diversification,” says Susan Dziubinsk, director of content for Morningstar.com. Sometimes growth stocks outperform value stocks, while other times value stocks outperform growth stocks, she explains. Therefore, experts recommend gaining exposure to both styles. You should also own small caps and large caps since small caps have periods of outperformance and large caps do not. Be sure to keep an eye on emerging-market stocks, as they can fluctuate.

“Those of us who’ve heeded that advice probably have dedicated large- and small-cap funds, individual value and growth funds, and perhaps even multiple international funds,” adds Dziubinsk.

“Do we really need all of these building blocks to have a well-diversified investment portfolio, or can one or two broad-based funds do the job instead?” she asks.

It is true that index funds can provide a sufficient level of diversification, but only when they are far-reaching. You can, for example, gain exposure to a significant chunk of the global stock market by combining Vanguard Total Stock Market with Vanguard Total International Index. With just two funds, you get plenty of diversification at a low cost. It is also possible to find actively managed funds that fit the bill.

If investors really want to simplify their equity positions, they might choose a fund from one of Morningstar’s global stock categories, for example. These funds provide global diversification in one investment by investing in both US and international stocks.

7. Invest in index funds.

With this strategy, you buy an index fund based on an attractive stock index. Nasdaq Composite and Standard & Poor’s 500 are two popular indexes. Even if you own only one investment, each includes many of the market’s top stocks, giving you a well-diversified portfolio.

Furthermore, through the fund, you own the market and get its returns, rather than trying to beat it.

A buy-and-hold investment approach coupled with an index fund can produce great results, especially when paired with an index fund. As a result of the index’s assets being weighted, your return will be calculated based on the weighted average. You’ll also have lower risk if you have a diversified portfolio.

8. Index and a few.

Using the “index and a few” strategy, a few small positions are added to the portfolio while using the index fund strategy. Suppose, for instance, you invest 94% of your money in index funds and 3% in Apple and Amazon if you think they are well-positioned for the future. For beginners, this is an ideal way to keep their focus on lower-risk index strategies while also gaining a little exposure to individual stocks that they enjoy.

By combining the best of index funds and stocks, this strategy offers lower risks, fewer tasks, and good potential returns. If these investments don’t work out, the individual positions can help beginners learn how to analyze and invest in stocks without spending too much.

9 . Invest sparingly in real estate.

You may already be hesitant to invest in real estate due to the housing bust a few years ago. In the event that you do decide to include real estate in your portfolio, you might consider buying the property with cash or with a large down payment. You’ll then be able to keep most or all of the rent you charge. In addition, there could be a reduction in taxes and maintenance expenses.

If the property appreciates, that’s great. But, on the flip side, if the value decreases, your money could also disappear.

10. Purchase a target-date fund.

As you approach retirement a target-date fund adjusts its asset allocation automatically. The result is a simpler portfolio and a better chance of reaching your retirement goals.

In general, target-date funds have higher fees than other types of investments, such as index funds. For some investors, target-date funds may be worth the higher fees due to their convenience and simplicity.

To invest in a target-date fund, follow these steps:

  • Consider your age and risk tolerance when selecting a target-date fund. People of all ages can invest in target-date funds, from their 20s to their 70s. However, investing in a target-date fund should be more conservative as you get older.
  • Join a brokerage firm that offers target-date funds. If you prefer, you can open an account with a robo-advisor instead of a traditional brokerage firm.
  • Set up an account and fund it. Contributions can be made regularly or in lump sums..
  • Rebalance your portfolio automatically. To ensure that your portfolio stays on track, you can set up automatic rebalancing to ensure that target-date funds automatically rebalance their portfolios.

11. Income investing.

Dividend stocks and bonds are often considered income investments because they produce cash payouts. You can use the return as hard cash or reinvest it into more stocks and bonds if you want. In addition to cash income, income stocks may also provide you with capital gains.

By selecting index funds or other income-focused funds, you can easily implement an income-investing strategy without picking individual stocks and bonds. With income investments, you get a regular cash payout from your investments and less fluctuation than with other types of investments. In addition, dividend stocks with high quality tend to increase their payouts over time, increasing your earnings without additional effort.

12. Investing that is tax-efficient.

According to The Schwab Center for Financial Research, taxes, and other expenses can negatively impact investment returns. Returns are primarily affected by asset allocation and investment selection.

Tax minimization also has a significant impact, according to the study by Charles Schwab.”The Importance of Tax-Efficient Investing.

This can be attributed to two factors:

  • As a result of paying taxes, you lose money.
  • By not investing the money, you lose the opportunity for growth.

In other words, among all your expenses, taxes can do the most damage to your return. Additionally, putting the right investment into the right account is key to tax efficiency..

Investment accounts can be divided into two main categories.

  • Taxable accounts. An example of a taxable account is a brokerage account. There are no tax benefits associated with these accounts. However, they offer fewer restrictions and more flexibility than IRAs and 401(k)s, which are tax-advantaged accounts. In contrast to an IRA or 401(k), you can withdraw funds from a brokerage account without penalty or taxation at any time.
  • Tax-advantaged accounts. There are two types of tax-advantaged accounts. those that defer taxes or those that are tax-exempt. A tax-deferred account, such as an IRA or 401(k), provides a tax break upfront. Contributions to these plans may be tax deductible, providing you with an immediate tax benefit. Your retirement money is taxed when you withdraw it, which means it is deferred.

13. ETFs with no fees.

In exchange-traded funds (ETFs), no-fee ETFs can be bought and traded without having to pay a commission to a broker. To remain competitive, brokerages are offering investors the chance to buy or sell these securities for free.

It is important to take into account your investment goals and risk tolerance when selecting an ETF. As well as comparing expense ratios, you should also compare the costs of different ETFs, because even fee-free ETFs can have small fees that eat into your returns.

Additionally, you should keep the following in mind when choosing an ETF that is fee-free.

  • Investment objective of the ETF. If you wish to invest in an ETF, make sure its investment objective aligns with yours.
  • Expense ratio of the ETF. ETF expense ratios are the annual fees that you pay to own the fund. You should look for ETFs with a low expense ratio.
  • Liquidity of the ETF. An ETF’s liquidity refers to its ability to be bought and sold easily. When you need to trade an ETF, choose one that has a high liquidity level.
  • Track record of the ETF. Make sure the ETFs you invest in have a proven track record of success.

14. Dollar-cost averaging.

In dollar-cost averaging money is added to investments on a regular basis. It may be possible for you to invest $400 each month, for example. Regardless of market conditions, you invest $400 each month. Alternatively, you could add $150 per week. Spreading out your purchase points allows you to buy an investment regularly.

When you spread out your buy points, you avoid the risk of “timing the market,” which means dumping your entire investment all at once. The benefit of dollar-cost averaging is that you don’t end up paying too much for your investments over time. As well as helping to establish regular investing discipline, dollar-cost averaging helps establish a habit of investing regularly.

As long as you are disciplined, you will eventually have a larger portfolio.

15. Low-cost brokerage accounts.

The term discount broker refers to an online stock broker that offers rock-bottom prices. Generally, discount brokers do not charge commissions on stock purchases or sales, and keep other fees to a minimum.

The Fidelity Investments platform, for example, offers no commissions, a wide range of investment options, and investor research… For beginners as well as advanced traders, it’s a great option.

In addition to offering commission-free trading on stocks, ETFs, and options, TD Ameritrade is another reputable brokerage firm. With TD Ameritrade, there is no commission on stocks, options, or ETFs.

16. Peer-to-peer lending.

Individuals and businesses lend funds directly to each other through peer-to-peer lending (P2P lending), without the involvement of financial institutions. The P2P lending platforms serve as intermediaries between lenders and borrowers.

It works like this.

  • Borrowers create loan profiles on P2P lending platforms, such as Prosper or Funding Circle, providing information about their credit history, income, and loan purpose.
  • Borrowers’ profiles are reviewed by lenders before they make a loan decision.
  • The loan is disbursed if sufficient funding is received by the borrower.
  • Over time, the borrower repays the loan with interest.

Borrowers who are unable to qualify for a loan from a traditional bank may find P2P lending to be a good alternative. In addition, it can provide lenders with a way to earn a higher interest rate than they would get from savings accounts and certificates of deposit.

The is a downside with P2P lending, though. There is a risk that the borrower will default on the loan. As a result, the lender may lose all or some of their investment.

17. Avoid using margin debt.

Margin debt refers to borrowed money used for investing. Investing this way can be expensive and risky.

Losses can also be large. A margin requirement of 50%, for example, would require you to put down only $5,000 in order to buy $10,000 worth of stock on margin. Your investment plus the $5,000 you borrowed would be lost if the stock value falls by 50%.

As a result, margin debt should generally be avoided. Investing with savings is a better option if you don’t feel comfortable with the risks.

The following tips will help you avoid margin debt.

  • Invest only money you can afford to lose.
  • Stock investments should not be made with borrowed money.
  • Traders should be aware of the risks associated with margin trading.
  • You should not trade on margin if you are not comfortable with the risks involved.

18. Low turnover funds.

Generally, a fund with a low turnover ratio sticks to the same stocks. In an actively managed fund, this could mean a buy-and-hold strategy is used by the fund manager. Passively managed funds, however, tend to have low turnover rates. ETFs and index funds both fall into this category. In many cases, lower turnover results in higher net returns.

The costs of running a mutual fund are lower when the fund has a low turnover rate. As a result, you can save money. It is mostly capital gains distributions that are responsible for the higher tax costs. You must pay taxes when a mutual fund manager sells gains-producing securities. You receive these as well.

19. Regularly rebalance.

If you prefer a portfolio with equal portions of stocks and bonds or one with crypto and other investments, rebalancing your accounts regularly is essential.

For example, consider a portfolio with 70% stocks and 30% bonds. Stock funds may be overweight towards stocks if their values increase 20% in a year while bond funds decline by 5%. Alternatively, you could sell some of your stock funds and use the proceeds to purchase bonds until you are back at 30%.

20. Avoid load funds.

A load-charged mutual fund is one that charges a sales fee. It is generally charged either at the time of purchase (a front-end load) or at the time of redemption (a back-end load). In addition, level loads are charged every year.

Based on how high the sales charges are, your real returns will be reduced. Julian Morris, CFP, principal of Concierge Wealth Management, says front-load funds can charge as much as 5.75 percent. In addition, the mutual fund company might charge a lower fee if you have more money with them. Redeeming shares within one year of purchase may result in higher back-end fees, Morris says.

21. Minimize trading.

It is possible to reduce transaction costs and capital gains taxes by limiting your number of trades. The reasons for this are as follows.

  • Transaction costs. Transaction costs, such as commissions and fees, are incurred every time you buy or sell an investment. If you trade a lot, these costs can add up. You can reduce your transaction costs by limiting how many trades you make.
  • Capital gains taxes. If you hold an investment for a long period of time before selling it, you will pay a higher tax rate on capital gains. If you sell your investment within a year of purchasing it, you are subject to short-term capital gains tax. Long-term capital gains are taxed at lower rates if you sell an investment after one year. Capital gains taxes can be reduced if you hold your investments for a longer period of time.

22. Ignore the noise.

Business news and market reports have now been infiltrated by the 24-hour news cycle — and broke influencers. on social media. When all these so-called “experts” tell you to buy, sell, invest, or sell out, your head spins.

A large majority of what happens in financial markets has little to do with your portfolio or investment strategy. So, don’t be swayed by the latest media reports.

23. Don’t try to time the market.

There is no way to predict the direction of the market. As such, you are guaranteed to lose money if you try to time the market. The best investment strategy is to ride out market fluctuations over the long term.

In the words of Peter Lynch, “Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.”

24. Avoid panic selling.

In times of market decline, it’s natural to panic and sell your investments. In most cases, this is the wrong thing to do. Your losses are locked in if you sell when the market is down.

The better approach? Be calm and ride the storm out.

25. Remain hands-off.

You should leave your portfolio alone for years (or even decades) at a time if it is diversified and well-managed. It generally pays off to tinker with your system less over time. Likewise, nervous investors have lost a fortune when hearing bad news and exiting the market.

To put it another, view your investments like you would your home alarm system. You don’t have to worry about them messing with them since they are always there.

When it comes to investing, the “keep it simple, stupid” approach is almost always the best way to go — unless you have advanced degrees in economics or years of trading experience.

26. Get financial advice from a professional.

If you invest less than a certain amount, you might assume that you do not need a financial professional. Financial professionals can help you manage your investments regardless of whether you are just starting out or nearing retirement.

Using a financial professional may help you identify and correct redundancies in your portfolio. Furthermore, you may be able to obtain free or cheap financial assistance from.

  • Financial institutions, such as banks and credit unions, if you have an account with them.
  • Are you part of an employer-sponsored retirement plan? You can receive free financial advice through it as well as other perks available through it.
  • Wounded veterans, domestic violence survivors, and cancer patients can receive pro bono financial planning services from the Foundation for Financial Planning.
  • Prospective clients can schedule a free consultation with some in-person investment advisors.

Conclusion

You can build wealth more efficiently and cost-effectively by simplifying your investment portfolio. With these 26 investment strategies, you’ll be able to save money on fees, reduce complexity, and focus on your financial goals.

In order to succeed in investing over the long run, it is important to remain patient and disciplined.

FAQs

What are the benefits of simplifying my investment portfolio?

Investing in a simplified portfolio has several benefits.

  • Firstly, it can save you money on fees. In general, the more funds you have in your portfolio, the more fees you will likely pay.
  • Secondly, a simpler portfolio is easier to manage. As a result, you won’t have to spend as much time tracking and updating your investments.
  • Thirdly, a simpler portfolio is less risky. You are less likely to lose money if one asset class does poorly when you have a diversified portfolio.

How can I simplify my investment portfolio?

You can simplify your investment portfolio by following these tips.

  • Consolidate your accounts. Consider consolidating your multiple investment accounts into one or two. You will be able to track your investment performance and manage your investments more easily this way.
  • Sell unnecessary investments. If you no longer need or want certain investments, sell them. If you do this, your portfolio will become simpler and you will be able to invest in other assets with the extra cash you save.
  • Invest in low-cost index funds. Mutual funds and exchange-traded funds that track specific market indices, such as the S&P 500, are known as index funds. In general, index funds are very low-cost, which can save you money.
  • Rebalance your portfolio regularly. Keeping your desired asset allocation requires rebalancing your portfolio to maintain the mix of assets. In addition to helping you stay on track with your financial goals, it can also reduce your risk.

What are some of the most common investment fees?

Among the most common investment fees are.

  • Management fees. To cover the costs of managing mutual funds and ETFs, management fees are charged.
  • Distribution fees. In order to cover the costs of marketing and distributing the fund’s shares, mutual funds charge distribution fees.
  • Expense ratios. As a percentage of the fund’s assets, expense ratios represent the fund’s total annual operating expenses.
  • Trading fees. When you buy or sell stocks, bonds, or other securities, brokerage firms charge you trading fees.
  • Load fees. When you purchase or sell mutual funds, you are charged these fees.
  • 12b-1 fees. A mutual fund charges these fees to cover marketing and distribution costs.

How can I reduce investment fees?

To reduce investment fees, you can do a few things.

  • Invest in low-cost index funds. The cost of index funds is typically much lower than the cost of actively managed mutual funds.
  • Use a discount brokerage firm. In general, discount brokerage firms charge lower trading fees than full-service brokerage firms.
  • Buy and hold your investments.  If you hold your investments for a longer period, you will pay fewer fees.
  • Automate your investing. By doing this, you can avoid making impulse purchases and fees associated with trading.
  • Avoid load funds. You should avoid load funds since they charge fees when you buy or sell them.
  • Choose funds with low 12b-1 fees. Mutual funds charge 12b-1 fees annually to cover marketing and distribution expenses. A low 12b-1 fee is best because these fees can add up over time..

Featured Image Credit: Tima Miroshnichen; Pexels; Thank you!

John Rampton

John Rampton

John Rampton is an entrepreneur and connector. When he was 23 years old, while attending the University of Utah, he was hurt in a construction accident. His leg was snapped in half. He was told by 13 doctors he would never walk again. Over the next 12 months, he had several surgeries, stem cell injections and learned how to walk again. During this time, he studied and mastered how to make money work for you, not against you. He has since taught thousands through books, courses and written over 5000 articles online about finance, entrepreneurship and productivity. He has been recognized as the Top Online Influencers in the World by Entrepreneur Magazine and Finance Expert by Time. He is the Founder and CEO of Due.

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