Improve Investment and Financial Results - Simplify and Conquer

Here is an example of when less is more when managing your investments:

Simplify:

• Narrow your mutual fund choices to no more than about 5 or 6 funds. If you are using multiple funds to diversify across multiple sectors to achieve balance, this is good, but too many people accumulate a large collection of diversified funds that do little to improve the performance or diversification of your portfolio.
• Limit your core portfolio to a few index funds to cover different sectors of the market to achieve balance, to which you can decide to add one or two actively managed funds, and you will be able to achieve more diversification with less duplication between funds.
• All things being equal, keep most of your funds in the same fund families and get yourself a master account like the ones provided by Schwab that will let you manage funds from multiple companies in one account - this way you will have one statement to look at.  When you have more than about $500,000 in one account, start putting new money into a second account at a different brokerage firm for diversification, in case something happens to disrupt the operations of the firm.
• With fewer statements to look at, fewer accounts to manage, you will save time and energy, and maybe you will actually get a chance to take a look at your statement for a few minutes a month.

Keep Speculations and True Investments Separate:
If you include speculative investments in your portfolio (which I define as anything you feel you need to keep track of more than once a month), keep them in a separate brokerage account and limit them to no more than 10 to 20% of your overall portfolio.

Simplify Stock Portfolio Management - Use Stop-Loss Orders and Review them Monthly:
When you buy a stock, you should already have decided what price you would sell at if it goes UP to that point, and another price where you would sell to stop your losses if it goes DOWN to that point (your stop loss).  Your stop loss order should be no more than 20% lower than the price you bought the stock at.  If the stock goes up, you should move the stop loss UP to no less than 80% of the new price, but you should never move the stop loss down.  This imposes a sell discipline that takes the emotion out of managing your portfolio.

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