Simplification is a beautiful thing in investing. So much so that Thoreau wrote about it in Walden, Simplicity, simplicity, simplicity! I say, let your affairs be as two or three, and not a hundred or a thousand; instead of a million, count half a dozen, and keep your accounts on your thumb nail.
While some would call it wisdom well ahead of his time, the idea of simplicity rings true in investments today more than ever. The more complex your investments are, the less time and energy you have to devote to them. There really can be too much of a good thing. These are just a few small steps you can take to simplify your investing to create an even brighter future from your investment actions.
1) Consolidate Your Accounts
The fewer accounts you have to contend with, keep records on, and reconcile every month, the better it is for your current and future financial states. Seriously, unless your accounts are above the FDIC limit, theres no need to have more than one checking, savings, and other accounts.
This includes rolling over 401(k) accounts from former employers and consolidating retirement accounts when possible. Also consider having one custodian or manager for your accounts when possible. This will additionally help to eliminate some of the many fees that are lost in administration, record keeping, and management.
2) Hire an Investment Advisor
Advisors play valuable roles in helping you to understand where you are, financially, and what you must do in order to get your finances to the place youd like them to be. Independent advisors offer many benefits over doing it yourself, because they have specialized skills in financial matters and lack the emotional (and not always wholly rational) investment most individuals have associated with their current financial states.
3) Create an Investment Plan
If you dont have a plan, now is the time to create one. You cant get to where you want to go, financially, if you havent even figured out where that place is. Sit down and map it out.
4) Put Your Financial Plan in Writing
Once you have a plan, its time to put that plan in writing. It has to be in writing to make it real for you. Put it in writing and revisit it often to make sure youre still on track to meet your goals.
5) Do Less
Instead of going on 24-hour market watch and chasing every bigger, better stock buy that comes along, invest in low-cost, low-maintenance mutual funds, sit back, and watch your money grow. Whats simpler than that,
6) Automate the Process whenever Possible
Establish payroll deductions for 401(k) and other retirement plans. Set your checking account to send money to various funds monthly, quarterly, etc. automatically. Look for ways to make investing as low maintenance as possible and then let the money grow while youre off doing other things. After a while, youll be surprised by how quickly your funds are accumulating and how much your investments are paying off.
7) Follow Your Instincts
If it doesnt feel right, dont make the investment. Dont be afraid to get rid of old investments that are no longer working for you either. Its your investment. Make sure its one that reflects your goals and values.
8) List Your Investments and Original Reason for Making the Investment
Dont hold on to investments for sentimental reasons. If an investment is no longer living up to its original purpose in your stock portfolio, its time to let that investment go. Simplicity is a beautiful thing, especially when it comes to investing. The more you simplify your investing efforts, the better they may pay off for you in the end.