When leaving one job for another do you leave your personal pictures and belongings behind? Of course not, but many people do leave their 401(k) account with their previous employer. At the very least this can mean the account is getting no attention, at the worst it means the account is not part of a holistic financial and retirement strategy. “Left behind” 401(k)s are subject to the same changes in fit, fees, and quality as other accounts, the difference is no one is paying attention. Converting a 401(k) into an Individual Retirement Account or consolidating with another retirement account is a fairly easy process and worth discussing with your financial professional. 

Churning milk or cream in a machine can produce butter. Churning financial accounts produces increased commissions for financial professionals who do not have their customer’s best interests in mind. Excessive trading in accounts can increase trading commissions. This unethical behavior can cost significant money (and returns) in fees, taxes, and performance losses. Financial professionals should be trading with their customers’ goals in mind, not their own commissions.  

“You need to diversify your investment portfolio.” You have probably heard it a hundred times. The idea being your investments are mixed enough that they do not all lose value simultaneously (in the case of a downturn). Unfortunately, going to extremes diversifying your portfolio can actually make investment performance worse. This is called “worsification by diversification.” One example of this phenomenon is spreading accounts across multiple financial institutions. While it seems you are diversifying (dispersing finances out), it is actually a detriment. Consolidation of accounts allows for two huge benefits:

Your investment portfolio is not static. While “over” trading can lead to higher fees and lower returns, leaving everything in place for too long can leave you with more (or less) risk than you’d like and an improper alignment of your investments to your goals.

As a reminder, life use accounts are precisely that, accounts and/or assets we use for daily living. Your checking account is not a way to save money or invest. It is simply a container to hold your money as it flows in and out. Savings accounts are also considered life use accounts. They are not typically viewed as long term (more than 12 month) investment type accounts.