There are at least four things you can do to get better returns on your money.
- Create an asset allocation program and stick to it. Don’t chase the market up and don’t sell at the bottom. If you have created an asset allocation that is right for you, it should be robust enough to take advantage of rising markets and allow you to sleep well at night in declining markets.
- Be tax aware. Don’t buy mutual funds in taxable accounts at the end of the year just before they make their capital gains distributions. Take tax losses to offset capital gains.
- Keep an eye on costs. Investment firms are increasingly turning to fees for services they once provided for free. Your investment manager should be aware of the fees you are paying and keep them under control.
- Re-balance your portfolio regularly. It may be tough to sell some of your winners and add to the losers, but it works. It’s really tough to sell on euphoria and buy on fear, but some of our biggest winners were bought when nobody wanted them and they could be bought for pennies on the dollar.