How To Maintain Proper Asset Allocation

What most people will not tell you when it comes to dividend investing is how to manage your assets and rebalance when you need to. Maintaining your assets over time is key to your success in the long term. The reason this is important is because over time, your portfolio will shift because some investments will do better than others.

Allow me to give you an example. Let us say you have an asset that outperformed most of your other investments. Because of this, the particular sector could be out of whack for lack of a better term. This might not matter to you but eventually the market will adjust back and all that profit you made will now be lost. It is counterintuitive to sell your winners but sometimes it is needed. You go up 10% and the next year that same asset takes a hit of 10%. Selling a few shares and reaping the benefits and buying other assets will help prevent your portfolio from losing those gains.

Most Investors Fail at Asset Allocation

The big problem that most people encounter have is dealing with multiple investment accounts. This can cause you to struggle maintaining your asset allocation. Overtime, the average investor will build a large portfolio that revolves around multiple accounts, asset allocation becomes a nightmare. I am trying to stick to one account for now and at most have two down the road. I want to minimize my workload by keeping things simple. At least that is the goal.

As you progress with your investments, you will most likely encounter these accounts and open them to invest.

• Traditional Brokerage Account
• Roth IRA
• 401k (and you could have multiple of these as you change employers)
• SEP IRA (or solo 401k, or SIMPLE IRA)

How do I Manage It?

Using free tools can help you out a lot. Creating a spreadsheet or downloading one that is already made will help you with this. I currently use a website and spreadsheet to track my dividends. I am working on an asset allocation one right now to add to my list of tools.

Besides a spreadsheet, you can use free websites that help you with maintaining proper asset allocation. A good website you can use it Empower (Personal Capital) to help manage your accounts. It is free to use and comes with many great features.

There are also paid websites you can use like Quicken. Quicken has more features than Empower but that is too be expected since it is a paid site and not free.

Conclusion

Take the time to review your portfolio and rebalance when needed. I suggest doing this every 6 months and just taking a hard look at your assets. See which ones are performing well and do research to see if there could be a downfall coming up. If you are just starting this might not hit you too hard if you take a fall but once you reach the tens-of-thousands of dollars, a fall can hurt a lot.