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There are times when it may make sense to update your investment portfolio. Maybe your investing goals and risk tolerance have considerably changed, an event has occurred that reduces your need for capital appreciation (like a big inheritance) or you suddenly need access to your investments in the near future (three or so years).
Beyond these few exceptions, however, experts generally advise investors to leave their portfolios alone and hold for the long term. And, it’s especially a bad time to make changes to your investments under two specific conditions.
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1. During market volatility
It’s easy to worry and feel like you need to get your money out of the market whenever it takes a nosedive. However, market downturns, and volatility in general, can be the worst time to change course. These are actually the moments when you need to hold onto your long-term investment strategy and ride out the storm.
“The short-term fluctuations in the market, which loom so large to investors, have little to do with the long-term accumulation of wealth,” says Tony Molina, a CPA and senior product specialist at Wealthfront. “Our advice for worried or anxious investors stays the same no matter what: Do nothing.”
To avoid reacting to market fluctuations, refrain from looking at your portfolio often. It’s a natural instinct to want to immediately respond to a loss in value, so skirt around that knee-jerk reaction by checking up on your investments as little as possible.
Using a robo-advisor is an easy and affordable way to be hands-off with your investing approach. The best robo-advisors offer low-cost diversification and will automatically adjust your investments regularly, also known as rebalancing, so you can rest assured your portfolio is being taken care of. Select reviewed 22 different platforms and narrowed down our top five picks:
You can read our methodology below for more information on how we chose the best robo-advisors.
Target date index funds are another option for investors who want to be hands off. With a target date fund, you indicate your target retirement date and those who manage your fund will restructure it so that your investments get more conservative, or less risky, the closer you get to that date.
2. During an emotional time in your …….