How to Spend Less Time Managing Your Investments (and Why You Should) Managing a diversified portfolio of investments is essential if you want to accumulate wealth, save for retirement, or generate streams of passive income. Unfortunately, it takes a lot of work...

Managing a diversified portfolio of investments is essential if you want to accumulate wealth, save for retirement, or generate streams of passive income. Unfortunately, it takes a lot of work to be successful – or so it seems.

With the right strategies, you can greatly increase your productivity in the realms of financial and investment management.

So how do you do it?

The Power of Reducing Active Management Time

On some level, it’s a good thing to spend time on managing your investments. Spending additional hours on due diligence means you’ll choose wiser investments to add to your portfolio, and being more mindful of your investments can lead you to better decision-making, even in your day-to-day life.

However, there are many benefits associated with reducing your active investment management time – at least for most people.

Time Savings

All of us could benefit from ending time waste. And chances are, not all of the time you spend managing your investments is spent wisely. Every hour you reduce in pursuit of more efficient investment management is an hour you can spend on something else. Depending on your priorities, that could be your education, work, a side business, family time, or even time to just relax.

Strategic Adherence

The more time you spend managing your investments, the more time you’ll have to violate the principles of your core investment strategy. This is something that happens to a lot of amateur investors who like to chase promising new opportunities, even if it means deviating from their original vision. It’s true that investment strategies should evolve over time, but this should be slow, thoughtful, and deliberate. Reducing your time on investments means you need to be more methodical and rigid in your approach.

Emotion/Impulse Control

Similarly, spending less time engaged with your investments means you’ll be less susceptible to emotional overreactions and impulsive decision-making. If you check on the value of your portfolio several times a day throughout a downturn, you might feel increasing levels of panic. If you only check on the value of your portfolio once a month, you might not even notice that the downturn happened.

New Opportunities

You might think that spending more time on managing investments means you’ll encounter new opportunities, but this isn’t necessarily the case. Finding good opportunities is more about spending time wisely, rather than spending more time. If you’re more strategic and thoughtful about how you spend your time, you’re much more likely to uncover valuable opportunities.

Track (or at Least Recognize) How You’re Spending Time

The first step of the process is to track how you’re spending your time, or at least try to recognize your time expenditure from a high level. Most people spend an excessive amount of time on the following activities:

Price Checking

It’s good to check on the prices of your current assets at least periodically, but there’s a point where it becomes troublesome. As an example, it’s perfectly reasonable to check Bitcoin’s price after halving, but if you’re looking up the price of Bitcoin 25 times a day, you’re wasting your time. The more often you check prices, the more likely you’ll be to engage in impulsive decision-making and short-term decision-making, both of which can be harmful to the majority of investors.

Researching/Browsing

Many people also spend a disproportionate amount of time researching potential assets to invest in or browsing for new opportunities. These are arguably good ways to spend your time, but there’s a point where it becomes excessive. If your portfolio is already in a good spot, why spend time deliberately looking for something to dethrone the assets that already belong in that portfolio? If you still aren’t sure if an asset is worth adding to your portfolio after 10 hours of research, why are you even still considering it?

Rebalancing

When managing your investments, rebalancing a portfolio can be practiced in a variety of different ways, but it always involves some level of buying and selling existing assets. Spending too much time on this can artificially increase the volatility of your portfolio performance and simultaneously drain time that you could better spend elsewhere.

Active Management

And of course, it’s important to recognize that certain types of investment assets do require ongoing, active management. For example, if you have a rental property, you’ll likely be responsible for things like marketing the property, screening tenants, collecting rent, and making repairs. These are all necessary activities, but it’s very possible to spend too much time on them.

If you’re like most investors, at least one of these categories stands out to you. Immediately, you may recognize little changes you can make to reduce the time you spend in these categories. In the following sections, we’ll provide you with even more strategies for how to tackle these types of issues.

Develop a Passive, Long-Term Strategy

One of the best things you can do for yourself is to develop a more passive, long-term strategy. If you’re focused on buying and holding assets for 30 years or longer, you’re not going to be concerned with checking the prices of those assets on a daily basis, nor is rebalancing your portfolio going to take you much time or effort.

It’s true that not everyone values a passive, long-term strategy equally. If you have a short investment time horizon, a high risk tolerance, or more time to spend on more rapid investment decision making, this approach may seem foreign to you. But at least a portion of your investment portfolio should be allocated to passive, long-term holds – and you should apply long-term thinking to most of your decisions.

Choose Funds and Balanced Investments

Another good strategy for managing your portfolio is to choose funds and balanced investments over individual assets.

For example:

Target-date Funds

A target-date fund is a type of fund that automatically rebalances itself as you gradually inch closer to your retirement date. If you’re young, your asset mix will lean toward stocks and somewhat riskier assets. As you get older, the balance will shift toward bonds and safer assets. It’s the type of investment you can make even if you turn your brain off entirely, and it can save you a lot of time, even if its performance isn’t perfectly optimal.

Index Tracking ETFs

If you like investing in stocks, consider investing in index tracking ETFs. These funds allow you to indirectly invest in entire indexes with a single purchase; for example, you can invest in the entirety of the S&P 500. This way, you’ll get broad exposure to the market without needing to constantly research new assets or rebalance your portfolio.

REITs

If you like the idea of getting exposure to real estate, consider investing in a real estate investment trust (REIT). This way, you’ll get exposure to multiple types of properties at once, and you won’t be responsible for actively managing those properties.

Any Broad, Diversified Fund (With Low Management Fees)

Almost any broad, diversified fund is worth considering adding to your portfolio because it will have the advantages of low maintenance and little need for rebalancing. Just make sure you research the management fees so your earnings aren’t cannibalized.

Develop a Formula for Buying and Selling

Many investors lose time when researching new assets to add to their portfolio because they are so meticulous and perfectionist. But you can save a lot of time by developing a consistent formula that you can always apply to buying and selling. For example, you might target a certain PE ratio based on industry, or only buy an asset when it’s within a certain distance of its 52-week low.

The more consistent your approach is, the less time and effort you’ll need to spend applying it.

Set a Timeline for Rebalancing

Every expert agrees that occasionally rebalancing your portfolio is important. However, there are many schools of thought for how often you should rebalance. What’s important is that you make a conscious decision about what rebalancing timeline makes the most sense for you. And, it’s crucial that you consistently adhere to that timeline. For example, if you choose to rebalance your portfolio on an annual basis, don’t waste time in the middle of the year fine-tuning your holdings (unless you have a very good reason for doing so).

Utilize Automation

Automation is arguably the most powerful tool in any time-saving arsenal of strategies, so utilize it to the best of your ability. Most brokerage apps allow you to create automatic notifications for certain types of events. This could be something like a drop in price that reaches a certain threshold. This way, you don’t have to track prices actively; you can sit back and only respond when your attention is commanded.

Work With Professionals

Another option for some people is to work with professionals. If most of your assets are held and managed by an active financial advisor or broker, you won’t have to make many portfolio decisions on your own. If you hire a property management company to manage your rental properties, you can turn them into hands-off, passive investments. This usually costs money and can eat into your bottom-line earnings. However, it might be worth it if it means saving hours of your limited time.

Money is nice to have, but time is even more fundamentally limited. It’s important to manage your investments strategically and prudently. But, it’s just as important to use your time wisely when doing so. These strategies should give you the opportunity to greatly reduce the hours you spend on investing – without cutting into your bottom-line results.

Featured Image Credit: Artem Podrez; Pexels

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