As lingering inflation looms on the horizon, now is the time to focus on managing risk by reviewing what many investors appear to be ignoring: diversification.
4. Compare your sector allocation to the S&P 500:
Without such a strategy, investors often end up chasing a favorite sector or a couple of high-flying stocks which increases risk. This usually results in an imbalance among sectors compared to a well-diversified index such as the S&P 500. By trying to minimize the tax bill every time a stock is sold, an investor could eventually be left with a concentrated portfolio of just a handful of stocks. If the market keeps moving higher, holding on to your top performers will likely be a great strategy.
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