Here’s an interesting thought experiment from Carl Richards over on the NY Times “Bucks” blog…
Imagine that your investment portfolio somehow got liquidated overnight, such that when you wake up your holding are 100% in cash. If you were give the opportunity to buy back into the market at no cost, would you re-create the same portfolio that you’re currently holding?
If so, great. But if not, then why aren’t you already making changes? Perhaps your portfolio is too risky, or maybe it’s not risky enough. If that’s the case, then you should be taking steps to correct your allocation.
Sure, there are costs associated with re-configuring your portfolio. But there are ways of minimizing these costs. And there are also potentially huge costs association with hold the wrong mix of investments.
I would argue that a big reason that people don’t make changes is inertia, and Richards agrees. It takes time and effort to evaluate your goals and determine whether or not your portfolio fits your needs. It’s far easier to ignore your portfolio than it is to re-evaluate it.
But just because it’s easier to maintain the status quo doesn’t mean that’s the right decision. Do yourself a favor and take some time to reconsider your options. Sure, you may find that you’ve already dialed in the perfect solution. Then again, maybe not.