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3 Tips for Streamlining Your Portfolio

Christine Benz

For more, see our complete portfolio tuneup special report

Christine Benz: Hi, I’m Christine Benz for Morningstar.com.

No matter your life stage, streamlining the holdings in your portfolio is a worthwhile goal. You'll have fewer holdings to monitor and that will allow you to focus on really important issues like your asset allocation and whether you're on track to meet your financial goals.

I have a couple of tips for streamlining. The first is to start at the account level, merging small straggler accounts into a single larger account. For example, old 401(k) assets and smaller IRAs can be rolled over into a single large IRA in your name.

Another key way to streamline is to use total market index funds as the core building blocks for your portfolio. You can find total U.S. stock, international stock, and bond funds. Such funds should be very inexpensive, and they make it easy to monitor your portfolio's asset allocation. They are usually quite tax-efficient, too.

If you've devoted the bulk of your portfolio to inexpensive total market index funds, that means that more specialized holdings--like sector funds, style-specific funds, or region-specific holdings--probably will be redundant. These types of holdings can also add to your portfolio's costs.

As you cull holdings from your portfolio, just take care to factor in the tax costs of selling. You won't owe any taxes if you make changes to your tax-sheltered accounts, but selling from a taxable account can entail tax costs.

Thanks for watching; I’m Christine Benz for Morningstar.com.