Despite a global pandemic, both stocks and bonds enjoyed terrific performance in 2020. It's tempting to leave well enough alone.
But even though a policy of benign neglect for a portfolio invariably beats one that's too active, it's possible to be too hands-off, too. That's a particularly big risk given that the stock market has climbed for more than a decade. Left untouched, portfolios can become too stock-heavy, which tends to amp up volatility and can lead to sequence-of-return risk for soon-to-be and new retirees.
Investors can also grow complacent in their savings habits, assuming that strong market returns will continue to do the heavy lifting for their plans. And portfolios can get unwieldy: Investors often end up with more accounts and holdings than they really need. That's particularly true given that our portfolios are typically tethered to our employment situations, and the average American has 12 jobs in his/her lifetime.
Morningstar's 2021 Portfolio Tuneup is designed to help troubleshoot those problem spots and put your portfolio on track for the year ahead. Over the next week, we'll tackle the key steps to take to tune up a portfolio. On Friday, we'll focus on our model portfolios for retirement savers and retirees.
Monday: Check on Your Portfolio's Viability
Accumulators: Is Your Retirement Plan on Track? Rules of thumb won't cut it for this important question; how to customize based on your own situation.
Retirees: Are You Spending Too Much? The 4% guideline can put you in the right ballpark, but the best spending policies factor in time horizon, asset allocation, and market fluctuations.
Empty Nest Phase a Crucial Catch-Up Time Before Retirement Raising children is expensive, so use the empty nest years to redirect your savings toward retirement and avoid lifestyle creep, says financial planning expert Michael Kitces.
How to Bridge a Retirement Shortfall A combination of incremental, not revolutionary, changes can help bridge the gap.
Tuesday: Gauge Your Asset Allocation
How to Allocate Assets for College Savings Families must contend with competing challenges: steep glide paths and high inflation.
The Bucket Investor's Guide to Setting Asset Allocation for Retirement Use anticipated spending needs and probabilities of a positive return over your time horizon to back into the right mix of cash, bonds, and stocks.
Invest for Short- and Intermediate-Term Goals For goals that are close at hand, how do you balance loss aversion with return potential?
Are You an Asset-Allocation Outlier? From pensions to small-business ownership, how to know if your mix of stocks, bonds, and cash should not look like the others'.
Assess Your Asset Allocation for Retirement Tips for customizing your own glide path.
Wednesday: Evaluate Holdings Quality
Find the Right Investments for Your Retirement Portfolio Your knowledge level, desire to be hands-on, tax status, and tolerance for short-term volatility can help you identify the right investments.
The Best Core Stock Funds These mutual funds and ETFs blend growth and value large-cap stocks and earn Morningstar Analyst Ratings of Gold.
The Best Growth Funds These growth-focused funds all earn Morningstar Analyst Ratings of Silver or better.
The Best Value Funds These value-focused mutual funds and ETFs all earn Morningstar Analyst Ratings of Silver or Better.
The Best Foreign Stock Funds These international mutual funds and ETFs all earn Morningstar Analyst Ratings of Gold.
The Best Taxable-Bond Funds Here are the highest-rated mutual funds and ETFs across a series of Morningstar's taxable fixed-income categories.
The Best Municipal-Bond Funds Here are the highest-rated mutual funds and ETFs across a series of Morningstar's municipal-bond fund categories.
Thursday: Can Your Portfolio (and You) Weather Volatility?
Can Your Portfolio Withstand Volatile Times? Volatility can be around any corner.
A 7-Point Risk Drill for Your Portfolio A calmer market provides the ideal backdrop for a systematic checkup on your portfolio's risk factors.
Guess What? It May Actually Be Different This Time In volatile market environments, tune out the pundits and take a look in the mirror.
Friday: Model Portfolios for Retirement Savers and Retirees
The Bucket Approach to Retirement Allocation The ins and outs of using a bucket approach in retirement.