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It’s a move you may want to make as well.
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Some people with money in a brokerage account check their balances and positions on a weekly basis. But I’m not a fan of doing that — not in general, and especially not during a turbulent market.
For the past year, the stock market has been extremely volatile. And like many investors, I’ve lost money in my brokerage account, at least on screen. I’ve also lost money in my IRA, though to be fair, that’s money I can’t even access without penalty for many years, so it’s less of a concern.
Now, usually what I like to do is perform a quarterly brokerage account review, where I take a look at not just my account balance, but also the different investments I have. So far this year, I’ve put off that review because frankly, I know I’m not going to like the number I see on the screen, and I don’t want to get upset. (I write all the time about how a down portfolio is nothing to panic over, but it’s still upsetting to see big losses, even if they’re only temporary).
But I have pledged to review my brokerage account before the end of January. And when I do, this is the first move I plan to make.
Diversification is key
Over time, the value of the stocks and assets you own can shift. And that can lead to a situation where your investment portfolio isn’t as diversified as you’d like it to be.
In fact, a big reason I’ve been seeing so many losses in my brokerage account is that I was heavily invested in the tech sector, which took a massive beating in 2022. But I never intended to go so heavy on tech stocks. What happened was that in 2020 and 2021, the value of the stocks I held in that sector soared so that as of early 2022, I had a stronger concentration of tech stocks than I should’ve had.
I tried to slowly but surely correct for that by shifting assets around. But then the stock market started to decline, and selling off tech stocks to replace them with other stocks became less feasible.
The point, however, is that even though I didn’t actively go out and buy more shares of tech stocks, I wound up with a larger concentration of them than I wanted over time. So now, when I check my brokerage account in January, I plan to see how diversified I am. And if I don’t like what I see, I plan to make some changes to ensure that I’m not overly invested in a single market sector. That could mean dabbling in new sectors, or even branching out into new asset classes (for example, buying more I bonds).
An important move to make
A diversified portfolio can not only help you gain wealth over time, but also minimize losses during periods of market turbulence. That’s why I plan to focus on diversification at the start of 2023. And if you have a brokerage account, you may want to do the same.
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