Investors often underestimate the risk in their portfolio. Today, Laura Stover, RFC® and Michael Wallin, CFP® break down 5 common portfolio mistakes, as outlined by Christine Benz in Morningstar. They are portfolio sprawl, when your assets often overlap and have too high a correlation A redundant individual stock portfolio can be risky as well. For example, if you are overly weighted in tech stocks, what happens if there is a chip shortage?
Other risks include also-ran mutual funds, asset allocation not formed by the plan, and suboptimal asset allocation. It is crucially important to develop a plan that works for your individual situation, and stick to it. This includes modifying your portfolio when necessary.
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Timestamps (show notes):
0:00:49 Discussion on common portfolio mistakes
0:02:05 Portfolio sprawl and the importance of diversification
0:03:41 Redundant individual stock portfolios and the risks involved
0:05:59 The drawbacks of relying too heavily on mutual funds
0:07:51 The benefits of diversification and asset allocation
0:12:31 The impact of suboptimal asset location on taxes
0:18:39 The importance of dividing assets into income and growth
0:19:16 The need for a comprehensive retirement plan
0:26:45 The importance of tax alpha in retirement portfolios
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