Top 5 Ways Millionaires Judge Your Investment Portfolio
Written by
Caitlyn Moorhead
Edited by
Gary Dudak
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No one understands the bottom line of America better than high-net-worth individuals who will tell you to pull yourself up by the bootstraps and climb the ladder like they did — even if they kicked out the rungs behind them. Still, even if they are staring down their nose at the way you are building an investment portfolio, it doesn’t mean you shouldn’t take a look at how they succeeded.
Whether you want higher returns or more protection to weather risk during market volatility, diversifying your portfolio and investing like the uber-rich could just turn the tides of your fortune. Here are the top five ways millionaires judge your investing strategy.
No. 5: You Aren’t Keeping It Simple, Stupid
As Dwight from “The Office” once said, “Michael always says ‘KISS, Keep it simple, stupid.’ Great advice … hurts my feelings every time.” Insulting, maybe, but helpful definitely when it comes to building a diversified portfolio through the stock market and other alternative investments.
Most self-made millionaires focus on diversifying across broad sectors rather than complicating their portfolio with too many specific stocks or funds. In other words, by selecting a few well-chosen index funds or exchange-traded funds (ETFs), you can effectively cover the market, which reduces the need to manage numerous moving parts and better achieve your investment goals.
No. 4: You Aren’t Consolidating for a Re-Rack of Your Finances
Millionaires not only simplify their types of investments but also keep their accounts under one financial roof, where they offer low-cost ETFs and mutual funds whenever possible. Talk about getting your mansion in order.
If you aren’t consolidating as many of your accounts as possible, you’ll have to widen your management of them, which can be cumbersome. Having multiple wealth-building options doesn’t mean you can’t have them within one portfolio. To decide which financial provider to go with, consider features such as performance, track record, fees and underlying investments. You know, like rich people do.
No. 3: You Haven’t Hired Someone Who Gives a Fiduciary
Another tip for escalating your wealth-building time horizon in a way that a millionaire or even billionaire would approve of is to hire a fiduciary financial advisor who is legally obligated to act in your best interest. This caliber of professional helps you reduce risk and can be crucial in streamlining your portfolio management, thus ensuring it aligns with your long-term financial goals.
Simply put, hire the best person for the job, and make money off their labor like wealthy people do every day.
No. 2: You’re Waiting in the Wrong Streamline
Self-made millionaires have a unique approach to streamlining their affairs, and it’s more than just being associated (allegedly) with the money illuminati. For example, they manage risk by having all their estate planning, taxes, investments and income embedded in a strict culture, as they have gone through their own hard ways to create and protect their wealth.
“Work smarter, not harder” has to be a phrase coined by a millionaire. This is clear when you see how their approach can translate into minimizing accounts, investing tax-effectively, investing with downside protection and utilizing financial advisors.
No. 1: You Gotta Know When To Fold ‘Em and Know When To Count Your Holdings
And now, the number one way millionaires are most likely to judge your investment portfolio is … if you aren’t counting your holdings. Some self-made millionaires argue that too many holdings may be difficult to monitor. For example, 25 to 30 holdings may be the maximum number of investments before requesting a fund manager to keep yourself from being at higher risk.
That is the general suggestion from many financial advisors and millionaires alike, but the good news is that there are steps you can take to slim down your portfolio without negatively impacting its performance. Try and take a careful look at any of your stocks that make up more than 5% of your overall portfolio. Should any of the stocks account for 10% of your portfolio, that could be considered a risk.
Ultimately, when it comes to reasons why you should listen to and invest like a millionaire, the proof is in the pudding. In other words, try putting your investment portfolio through the same treatment the rich do.
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