| No. 2: Cut Your Investment Costs In most walks of life, you get what you pay for. This is emphatically not the case when it comes to investment managers. Every year, 3 out of 4 active fund managers fail to even match the return of their unmanaged benchmarks. Over periods of a decade or more, more than 95% of them underperform. Do you really want to pay hefty fees to someone with less than a 1-in-20 chance of delivering the goods? Investment fees and returns are inversely correlated. All else being equal, the more your advisor makes, the less you do. This is particularly true in the fixed income area. Ten-year Treasurys currently yield 4.2%, for example. If you plunk for an income fund with a 0.75% expense ratio, it may take a fifth of your annual return. That makes no sense. The goal is for you to get rich, not your broker. No. 3: Rebalance Your Portfolio The U.S. stock market has made a remarkable run since it bottomed during the financial crisis 17 years ago, returning 15% annually. If you've been an equity investor during this period, you probably have more in stocks than you'd be comfortable with in a prolonged downturn. So rebalance your portfolio. Rebalancing means you sell back those asset classes that have appreciated the most and put the proceeds to work in those that have lagged. This is a contrarian exercise. And the main effect is that it forces you to sell high and buy low. This adds to your long-term returns while reducing your risk. Over the last decade, international markets - and particularly emerging markets - have delivered much lower returns than domestic equities. Small caps have underperformed large caps. And value stocks have lagged growth stocks. Yet history tells us this will not always be the case. Eventually all asset classes revert to the mean. That means the losers become big winners. So fight the urge to keep riding large cap growth stocks higher and spread your risk. Yes, I often tell readers to hang on to their winning stocks and cut their losers short. But there's a big difference between trading individual securities and rebalancing your portfolio. When it comes to asset allocation, you flip the script and sell back the asset classes that have surged the most and add to the laggards. When the cycle turns - as it always does eventually - you'll be glad you did. Good investing, Alex | 
