No consensus exists as to the best method for building an equity portfolio. Some invest passively with index mutual funds. Others prefer a more active approach by picking individual stocks. Everyone wishes for above average returns and a secure retirement in comfort.

Regardless of individual preferences, prudent management of an equity portfolio will consider, at a minimum, these three practices:

• *Asset allocation* and *diversification* to balance risk and expected return
• *Performance monitoring* and adjusting holdings
• *Reducing costs* to a practical minimum

Doing this well can be hard work. Those who are unwilling to devote the time and effort may choose to pay a financial professional to handle their investments.

Make cost reduction easy

If you have decided to make your own investment decisions, you may have already found it surprisingly difficult to manage your equity portfolios on the web. You can track the value of your stocks minute-by-minute, but not much else. A diligent investor might have to resort to tracking their portfolios with spreadsheets.

Following the above practices should be easier. One reason we founded Realized was to give individual investors a genuine cost reduction tool.

The sell side can generate real expenses

One easy way to realize higher returns is by lowering your investment costs. And the biggest costs are not commissions or management fees, but rather the taxes on capital gains.

Most financial web sites are devoted to what might be called the buy side of investing. Financial analysts recommend countless stocks. Buying is easy and nearly cost free, with online brokerages and low commissions. You have a spectrum of choices: stocks, ETFs and mutual funds.

Almost no guidance exists about when and what to sell from your portfolios. You might be overweighted in the energy sector, but which stock should you sell? You can only sell a security that you already hold. The mass media simply has no interest in an audience of one that has a specific portfolio issue to address.

Closing a stock position also generates taxable capital gains. Selling the wrong security at the wrong time can have a catastrophic effect on your realized, after-tax investment return.

Each time a trade occurs, it also changes your asset allocation. This has the potential to change the risk versus return profile of your portfolio. Along with the control over making your own trades comes the potential for destruction.

Managing a portfolio successfully requires some discipline with regard to selling securities.

Forget about timing the market: focus on timing your portfolio

By netting out gains and losses, many investors can sharply lower their tax burden. Turning unrealized losses into actual losses allows for other sales to become literally tax-free. This helps when you want to rebalance and improve your diversification.

Some investment software apps focus on calculating your capital gains tax near the end of the year. You discover where you stand after the fact. By then, it may be too late to offset gains with losses. You are stuck with a capital gains tax that might have been avoided. This approach *fails* to reduce costs to a minimum.

Realized aims to change things

Should you buy this stock, or sell that one, and how would it affect my portfolio? For those investors who need a tool to assist with such decisions today, Realized can help.