The Almighty Dollar

Restoring some fiscal sanity in our -- negative savings rate -- lives

4.27.2006

Re-evaluating our portfolio

Although I've been absent from blogging, this past week has been quite important for me PF-speaking...

My husband and I have spent most of last weekend and early this week re-evaluating our retirement portfolio. It's been an encouraging experience overall, seeing how much it has grown due to healthy returns and diligent saving on our part.

We are in our early 30s (I'm 30, he's 32) and didn't really begin socking away money for retirement until a few years ago. Before that, we focused on saving as much as we could for our wedding and a home down payment. While things worked out okay, I still wish we had put more aside in our IRAs back then.

What frustrates us most is having our retirement savings spread out in multiple accounts: brokerage, traditional and roth IRAs, SEPs, and recently a self 401K. To reduce our taxable income, we focus first on maxing out our tax-deferred accounts. However, since the maximum contributions in IRAs are so small (only $4000), it's hard to build a portfolio in these accounts when the required minimum fund purchase is often $2500. So we really have to focus on the bigger picture and not get bogged down in each individual account.

I think it's wise to regularly monitor your investments. Make sure you like what you have, dump what you don't, and look for something new. Markets and industries change, and your portfolio should be smartly balanced for the times. When we started out, it was difficult to build a diversified portfolio with our small holdings. We did our own research and bought a handful of mutual funds in different categories. Over time, we dumped a couple that were underperforming and bought new ones, all with a longer-term outlook in mind.

Now that our portfolio is over $100,000, we wanted to examine our investments and make sure we were spread out enough. We felt that we were not well-balanced. Basically, we were heavy on a medical/health fund and were lacking in small-cap exposure. Also, our large cap fund has ballooned and was recently closed to new investors. While it's performed admirably, we are beginning to look into other large cap funds that are smaller and more nimble.

With these changes, we feel more secure about the way ahead.