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Managing Your Own Retirement Portfolio: What You Need to Know

Managing your own retirement portfolio is easier than ever, but is it a good idea? Here are the facts you need to make the right choices.


Until the mid-1970s, there was no such thing as an IRA or 401(k). Most retirement plans consisted of pensions and social security, and managing your own retirement portfolio was unheard of. Now? Finding a job that includes pension benefits is like finding the golden ticket from Willy Wonka’s chocolate factory: It is possible, but it’s not likely. Even if you do get pension benefits, it’s entirely possible the Oompa Loompas could toss it down a garbage chute. Not to worry, though.

Other retirement options, including the IRA and 401(k)s, can cover the same ground as pensions once did, and in most cases, they aren’t tied to working for a specific company. Your 401(k) is yours, regardless. The problem, however, is that with a stock market that’s been through multiple recessions and declines in the past couple decades, retirement income from a 401(k) that’s heavily invested in mutual funds is far from guaranteed.


Why managing your own retirement portfolio is a good idea

In 1956 Alice B. Morgan published the book, Investor’s Road Map. The book grew out of a series of investing classes that Morgan gave over the years to people in Bristol, Rhode Island. (She also became a national celebrity in her mid-70s from her appearances on the quiz show The $64,000 Question, but that’s another story.)

The classes Mrs. Morgan gave were free, and the book was a summation of her tips, a source of advice for those who couldn’t get to the class. What’s especially interesting, however, isn’t the advice itself. Mrs. Morgan was a plain-spoken Yankee of the old school and her rules were appropriate for the market as it ran in the 1950s. What was unique was the length to which she went to convince the women who made up a large part of her classes that they could (and should) actually invest on their own.

One big reason for managing your own retirement portfolio is that nobody cares more about your money than you do. So why would you leave it in the selections you made when you funded your IRA in 1990? Or why would you pay someone else to decide where you invest it?

There’s less mystery surrounding investing on your own these days. With so much information at your fingertips, do-it-yourself investing is much easier than it was 70 years ago - or even 10 years ago.

How to avoid the pitfalls of managing your own retirement portfolio

As easy as it can be to take the DIY approach to your retirement portfolio, there’s still one big mistake that we see most investors make: They love to buy stocks and they hate to sell them. When the market looks enticing, they become so excited that they begin to buy stocks, willy-nilly, with no thought to a balanced portfolio. And when the market drops, they become frozen, not knowing whether they should continue to buy more to take advantage of the lower prices or just bail out and sell everything. And the sad result is usually this: When under pressure, investors will generally make exactly the wrong decision!

But you don’t have to make the same mistakes. Instead, with a little thought and planning, you can create an all-weather portfolio. Now, I’m not saying you won’t ever lose money, because there are no guarantees in the stock market. But there are steps you can take to minimize your losses and also maximize your profits.

  • Make a list of famous companies. It’s okay to have 30 stocks on that list.
  • Look up Wall Street’s earnings per share (EPS) estimates for those companies.
  • Cross companies off your list that are not experiencing EPS growth.
  • Pick four or five of the remaining companies that represent various industries and sectors to keep in your stock portfolio.
  • Invest equal dollar amounts in each of those companies’ stocks. When you have more money to invest, buy more shares of the company that has the lowest dollar value in your portfolio. (It’s also okay to add another stock to your portfolio.)
  • Monitor the profit outlooks for your companies. Sell when profits stop growing.

Especially important in managing your own retirement portfolio is this: Invest in stocks that coincide with your risk profile. Not every stock will match your investment objectives nor will every one become a home run. Read a stock’s profile carefully and evaluate its investment in relation to your other stocks.

And don’t forget that the objective is to make money, not to own every good-looking stock in the market. Historically, most successful investors have concentrated their investment portfolios in a few great stocks and ridden those winners to big profits. That doesn’t mean you should put all your eggs in one basket. Our advice is that, when fully invested, you should own no fewer than five stocks, but put an upper limit at 12 or 15 stocks. There are three main benefits of good portfolio management.

  • First, you can keep up with all your stocks and track what’s happening at the companies.
  • Second, you’ll get more bang for your buck.
  • A third benefit of a concentrated stock portfolio: You can get in and out of the market more quickly at turning points.

And that’s what we help you with at Cabot Wealth Network—making your job managing your own retirement portfolio (or any investment portfolio) easier. With a variety of advisories and memberships offering a range of investment styles, you can find the advisory that matches your goals today, and change to a different style as your goals change. If you’re willing to invest on your own, we’re here to help—and have been since 1970.

Investing on your own isn’t as scary as you think. Managing your own money is empowering and educational, and profitable. An easy way to begin is to get your copy of our FREE report, How to Invest in Stocks and Other Investing Basics.

What are the most pressing questions you have about managing your retirement portfolio? Share your thoughts in the comments below.


*This post is periodically updated to reflect market conditions.

Cabot Wealth Network