Ask Erick: How Often Should We Review Our 401k Investment Lineup?

Q: Erick, how often should we review our 401k investment lineup?

A: It’s a good idea to review your 401(k) portfolio at least once a year. You’ll want to review your goals, time horizon, risk tolerance and portfolio performance. As your life and financial markets evolve, your preferred asset allocation can drift off course. To stay aligned with your preferred asset allocation, you may need to periodically rebalance your portfolio by selling some assets that have grown in value and buying others that have lagged. And if your priorities and goals change, you may need to adjust your asset allocation.

Next step: Let’s meet and discuss your 401k Fee Benchmark review.  Book a meeting below.

Quarterly Reminder

If you anticipate receiving a tax refund this year, consider creating an emergency fund with some or all of it. It’s important to have this money available for when something unexpected comes up, such as a car, refrigerator or dishwasher breaking down. Aim to have 3‒6 months of living expenses saved in an account that is separate from your checking account.

Tools and Techniques

An investment strategy in which 401(k) contributions are deducted automatically from your paycheck is known as dollar cost averaging. Specifically, it’s when you buy investments in steady increments instead of investing a lump sum all at once (e.g., $100 every week or 5% from every paycheck). When prices are low, you get more shares for your money. When prices are high, you buy fewer shares. This strategy can potentially help lower your average cost per share over time as you fund other financial goals. It’s important to note that while this approach doesn’t necessarily guarantee a profit or protect you against loss, it’s a very practical and disciplined way to invest.