You may have a car that isn't very fuel efficient. That can cause problems when you're out on the road.

But when it comes to investing, you can't afford to run out of gas in retirement.

Just like with a car, there are ways to make your portfolio run much more efficiently.

Checklist For Your Portfolio

In long-term investing, efficiency equates to minimizing waste. The idea is to squeeze the maximum possible returns from your investments. That's the easiest and most direct way to put more into your pocket.

Sound easy? Well, it's amazing how many people fail to cut waste. They don't realize there are several ways for investors to lose much of their returns.

Here's a five-point plan to eliminate inefficiencies in your portfolio plan. Try checking this list of key points to build a more successful investing future (in order of most counterproductive):

1) Behavior. Investor behavior has been shown to cost investors very significant losses in the range of over 2% per year. This has been confirmed by matching actual investor returns against the returns of the funds they hold.

The misguided behaviors can be divided into two areas. One is letting emotions govern your decisions even when knowing you should not make a move. The other is simply not recognizing destructive investing practices.

Both lead to attempts to time the market, chase hot funds, buy high and sell low and invest without a plan.

The emotional mistakes can usually be attributed to a portfolio that is too aggressive to begin with or attempts to significantly outperform the market (i.e., greed). It can also be from investors not knowing their own weaknesses.

It's important to note that mistakes due to ignorance can only be cured with a better understanding of investment fundamentals.

2) Bad advice. Getting poor suggestions and support from friends is one thing. But it's much worse when it comes from a paid advisor, which it often does.

Bad advice costs not only a good portion of yearly returns, but also can increase your chances of large losses in bear markets. If you are not knowledgeable at all about investing, you are at the mercy of your advisor's recommendations.

Even a competent advisor has some self-motivation that can easily get in the way of your best interests. And on top of that, there are many advisors who are not well qualified to provide investment advice.

The only defense against bad advice is having the ability to recognize it.

1 | 2 |