- Morningstar’s director of personal finance, Christine Benz, recently overhauled the investment portfolios of everyday Americans, from millennials to retirees.
- Her two biggest takeaways from working with these clients can apply to investors of any age: Keep it simple and don’t discount other aspects of your financial plan.
- The simpler and more streamlined your investments are, the less ongoing oversight they’ll require.
- But as important as investing in the markets is for building wealth, it’s not a panacea for misguided financial decisions.
- Read more personal finance coverage.
Investing doesn’t have to be complicated to be fruitful. In fact, it should be simple.
That’s according to Christine Benz, director of personal finance at Morningstar, who overhauled five investment portfolios of everyday Americans for Morningstar’s Portfolio Makeover Week 2019. She worked with investors of all ages, from a millennial couple balancing their 401(k)s and future homebuying goals to a pair of baby boomers gearing up to retire in the next few years.
Her two biggest takeaways from working with these clients can apply to investors of any age: Keep it simple and don’t discount other aspects of your financial plan.
“One thing that always strikes me as I go through this exercise is how complicated people’s portfolios are and how much simpler they could be,” Benz told Business Insider.
“I think streamlining is something that investors of all types can take to heart when they look at their portfolios,” she said. “I try to think about how they can get the job done with a simpler portfolio mix that ultimately will require less ongoing oversight.”
Job changes can result in multiple 401(k)s or IRA rollovers, for example, so it’s smart to combine those to avoid paying more fees and doubling up on the same investments. “I try to streamline at the account level,” Benz said, “and then definitely at the holdings level where people bring portfolios with a lot of overlap or maybe they have kind of a halfhearted individual stock portfolio that they don’t pay a lot of attention to.”
The simpler the investments, the less ongoing attention they require from the investor, Benz said.
“In my view, less is more. I think a good, one annual checkup is plenty for most of us,” she said. “People can be too engaged and that might be an enticement to get in there and make changes that, in hindsight, really aren’t necessary.”
It’s not just about the investment portfolio
It may seem counterintuitive, but being a successful investor often requires looking outside of your portfolio.
Many of Benz’s recommendations for her portfolio makeover clients relate to their larger financial plan, not just their holdings. Because as important as investing in the markets is for building wealth, it’s not a panacea for misguided financial habits.
“I think that the discussion in the whole investment community has been disproportionately around investment portfolios and there’s this belief that there’s some alchemy that you’d be able to work at the portfolio level that can save us even if someone is under-saved for retirement,” Benz said.
“When, in fact, it’s decisions like when you retire and Social Security claiming and what kind of budget you’re living on in your accumulation years, those are the decisions that ultimately are more impactful.”