Christine Benz, Morningstar's Director of Personal Finance, has written an important article about the importance of Simplicity for retirement portfolios. These are the excerpts that I liked the most:
4 Ways To Uncomplicate Your Portfolio"Retirement planning is complicated. Your retirement portfolio shouldn't be."
"Even investors who are using an advisor to help them plan their retirements need to educate themselves or get a second opinion on various matters."
"Creating a financial plan for retirement is too dang complicated. As pensions have been ebbing away, more and more people coming into retirement are grappling with knotty issues like figuring out a withdrawal rate, managing taxes while pulling assets from various account types, and determining how to cover healthcare and long-term-care expenses from their coffers."
"When it comes to your investment portfolio, simplicity should be your watchword."
"Here are four steps to take to ensure that your portfolio is as simple and effective as it can be:
Streamline your investment accounts.
Embrace simple portfolio building blocks.
Prune faux diversifiers and other clutter.
Document and stick with a once-annual review."
"Multiple tax-deferred accounts, whether IRAs or company retirement plan assets, offer a major consolidation opportunity, in that it is possible to collapse them into a single large traditional IRA."
"Employing a single provider for all of these accounts can also greatly simplify your oversight and record-keeping responsibilities."
"You could reasonably get away with a single total U.S. market tracker, an international index fund, a bond fund, and cash holdings." The Three-Fund Portfolio
"You can also keep your portfolio streamlined by cutting holdings that you thought would supply diversification and/or returns but that, at the end of the day, haven't added a lot to your portfolio's risk/reward profile."
"Plain-vanilla high-quality bonds, especially government bonds, have been the best diversifiers for equities."
"Many investors operate small "side" portfolios that consist of individual stocks. Such portfolios are usually ripe for the cutting when I do my Portfolio Makeovers each year."
"I'm a big believer in limiting your portfolio-oversight duties to a single comprehensive review per year, ideally as the year winds down. That way you won't be tempted by market action to change up your portfolio, and you'll have more time to focus on other things, financial and otherwise."
Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success."