As vaccination rates and afternoon temperatures rise, your plans may look like getting out of the house to jump in pools and search for your city’s most air-conditioned restaurants — anything to beat the heat. But as an investor, there’s one thing you don’t want to cool down during the summer months: keeping an eye on your investment portfolio.
The stock market tends to see a bit of a summer slump each year as trading activity slows and market returns hit a seasonal lull. Because of this slowdown, many investors follow the old adage of “sell in May and go away,” choosing to step back from actively trading or monitoring their portfolios from May until the end of the season — some even until Halloween.
Although historical trends show that the S&P 500’s performance is weakest during the summer months, it doesn’t necessarily mean you should take a vacation from monitoring your portfolio. Instead of taking a “set it and forget it” strategy with your investments this summer, use this time to give your portfolio some much-needed TLC.
Review and rebalance.
For even the most hands-off investors, it’s a good idea to give your investment accounts at least one check-in each year. Your portfolio isn’t static, and though you may strategically set it up in a certain way, it’s almost inevitable the balance of your investments will shift over time. Not all investments will grow or decline at the same rate, and without periodic rebalancing, your portfolio makeup can deviate from your desired asset allocation — potentially leaving you over exposed to certain risks or unnecessarily conservative.
Consider making it a regular habit to check in on your investment accounts — whether it’s a 401(k), individual retirement account (IRA) or a personal brokerage account. Doing so will help you stay on track with your goals and ensure your portfolio is in alignment with your risk tolerance and timeline.
If you use a robo-advisor, your portfolio is automatically rebalanced periodically. But even smart technology can’t read your mind if your goals or priorities change. Now is a great time to check in on your portfolio and make sure it reflects your current needs and objectives.
Strategize and synthesize.
The potential stock market summer slowdown is an opportunity to turn your attention away from market ups and downs and focus on your personal retirement investing strategy, whether you just recently started contributing to a 401(k) or IRA or you’ve been setting aside income for years.
The first step is to take stock of all your accounts and identify opportunities for consolidation. For example, you may have one or more 401(k)s from past employers sitting idle that could be rolled into your current 401(k) or an IRA. Consolidating multiple retirement accounts makes it simpler to manage your investments and can help you cut down on potential account fees.
Undergoing a Roth IRA conversion could be another option for your retirement dollars — basically, this means converting an existing traditional IRA into a Roth IRA. Consider your current financial standing and tax bracket before you decide if a Roth IRA conversion is right for your future.
Don’t let the season slow you down.
History has shown it’s normal for the stock market to cool off during the summer heat. And your natural instincts might say to let it be until activity picks up again in the winter and spring. But instead of taking a “set it and forget it” or “sell in May and go away” mentality, focus on maintenance mode. These months present an opportunity to get your portfolio prepped and ready for a new season and a lifetime of strategically pursuing your financial goals.
Find your footing in the stock market this summer with Ally Invest.
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During her tenure as president of Ally Invest, Lule led Ally Invest Securities, Ally Invest Advisors and API business lines. She also authored several articles about the investing industry and investor behaviors. Lule has a passion for agile product development and an appreciation of design thinking in shaping user-centric experiences. An advocate for financial and retirement solutions that rely on a mix of digital and human guidance, Lule believes in empowering individuals, especially women and minorities, to independently drive their own financial futures.