Despite what financial experts and those who think they are experts might say, you don’t need a whole range of financial products to invest successfully. One of the best things you can do when you are looking to plan for your finances in 2021 is to simplify things. Reducing the complexity can make it much easier to manage. This could mean taking steps towards reducing the number of different investments you have your hand in, consolidating your financial accounts.
The biggest thing you want to do would be to reduce the amount of time and energy that goes into managing your finances. Instead, you want to reallocate that brainpower to other aspects of your life that do require a lot of your attention. In this article, you will learn about some of the essential tips that should be used to simplify and better manage your financial life.
Holding Fewer Funds
One of the things that you can do to make investing much more simply no matter how big your portfolio is would be to take a data-driven approach. You can do this by holding a couple of different low-cost yet broad-market index funds and keeping them over the long haul. For instance, you could potentially choose a total stock market fund, a total bond market fund, and a total international stock fund. All of these together make up the “3-portfolio fund.” One of the best benefits that you will be able to get when you make this type of decision would be the ability to take a “set it and forget it” approach. There is nothing else you have to do other than rebalancing the account either 1 or 2 times per year.
By doing this, you will also be able to look at your entire investment portfolio with a much more clear picture. After all, if you have different funds and stocks in your portfolio, you will have to keep tabs on all of them. It can divert a lot of your attention that could be better put to use elsewhere. Also, you will have a much more complicated tax season and you have to calculate all of the fees and withdrawals that you make throughout the year. By holding fewer funds that don’t have the same maintenance requirements, it can simplify your investment portfolio by a significant amount. The effect of Brexit and UK smaller companies is set to bring about some good investment opportunities.
You want to try to avoid trading too much. Keep the activity in your account to the minimum. Try to avoid trading for the sake of trading and only do so when you need funds to cover emergencies or living expenses. You will also want to check your accounts quarterly to ensure that your asset allocation continues to be well on target. By trading too often, you will end up making tax season a nightmare. Likewise, if you are using a broker that charges per trade, you can find the fees adding up very quickly. The best way to simplify things and make your tax season easier and reduce fees is by trading with long term thinking in mind.
Automate Your Investing
A lot of brokers found online will allow you to deposit money directly from your bank in varying degrees of intervals. Whether it’s every week or every two weeks, you want to automate things. Setting up an automatic transfer is one of the best things you can do. It comes with a couple of benefits that make it well worth doing. For one, you won’t have to worry about doing it manually. Second, you will be able to avoid giving yourself the false impression that you can ‘time’ the market. By automated things, you can reduce a lot of the hassle and stress that comes with the process. Also, you will be able to guarantee that you are building your accounts no matter what the market looks like which can benefit you in the long run.
Use a Single Discount Broker
A lot of the discount brokers you will find available will provide you with all of the features that you would need as a retail investor. Try to stick to a single online broker because it will simplify things for you. Not only will you have access to everything the broker offers, but you will also be able to get a better picture of what your investment portfolio looks like. If you have multiple brokers, you will quickly find that it becomes much more of a hassle than it is worth.
Only Use Secure Devices
Do you need to check up on your investments from your mobile phone? Not only will it cause you to waste a lot of time needlessly looking at your phone, but it can cause you to make impulsive investing decisions. Being obsessive about your accounts has little to no benefit and it can end up hurting you in the long run. By sticking to only checking from your computer, you will be able to save time and ramp up your security. While apps do come with their share of convenience, it isn’t worth the hassle. It can be hard to resist constantly glancing at your phone when it’s so readily available to you.