Many investors still adhere to theold adage—"sell in May and go away"—while othersremainfully invested even asthe summer heat waves begin. What goes unsaid is that if your asset allocation accurately reflects yourrisktolerance, youwon'tneed to base your investment decisions on the calendar. Here arethreekeyinvestingmoves to make before the summer ends.
ReviewYour Asset Allocation
Market volatility can often provide the first clue thatyou'rejust not comfortable with your current asset allocation. Ifyou'refully invested in stocks and the idea of a 20 percent (or higher)drophas youconsideringpulling your funds out of the market, it may be worth investigating whether you should diversify into a few more conservative options. On the other hand, ifyou'redissatisfied with your rate of return when compared to the broader market indexes, you may want to invest more aggressively.
Your ideal asset allocation will depend on a few factors:
Your risk tolerance
Your investment horizon
Your investment purpose (e.g., retirement, paying for a child's college, a down payment, a wedding, or long-term savings)
For short-term investments, it's often advisedto keepyour funds in a more stable set of assets, like high-yield savings accounts, certificates of deposit, or government bonds.1Meanwhile, more long-term investments are often best kept in the market, where they can take advantage of compounding returns.
Take Full Advantage of Your Retirement Plan
If your employer offers a 401(k) match andyou'renot contributing enough to take full advantage of it, this is something you should change today. Retirement matches are essentially "free" money, as theyaren'tcalculated as part of your gross salary. By contributing to retirement up to youremployer'smatch,you'llbe able tobasically doubleyour retirement contribution with minimal impact on your paycheck.
For those who would like to start contributing more to their retirement accounts, setting aside a percentage of every raise can be a way to increase retirement savings without reducing your pay.
GetRid of Losing Stocks
Although many claim youdon'treally lose money on a stock until you sell it at a loss,there'san opportunity cost that comes when you tie up money in a stock for years without seeing a positive return. At least once a year,it'sa good ideato review your investments,identifyany "losers," and consider whetherit'stime to finally let them go.
Footnote
18 best short-term investments in April 2022, Bankrate,https://www.bankrate.com/investing/best-short-term-investments/
Important Disclosures
The opinions voiced in this material are for general information only and are not intended toprovidespecific advice or recommendations for any individual.
Investing involves risks includingpossible lossof principal. No investment strategy or risk management technique can guarantee return oreliminaterisk in all market environments.
Asset allocation does not ensure a profit orprotectagainst a loss.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All information is believed to be from reliable sources;howeverLPL Financial makes no representation as to its completeness or accuracy.
This article was prepared byWriterAccess.
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