5 Reasons to Take Your Investments Off Autopilot

By Retirement

Taking a hands-on approach to your investments can be a smart strategy if your goal is to build wealth. But in a busy world, who has time for that? While putting your 401(k), IRA or other investments on cruise control is a hassle-free way to save, that can cost you money in the long run. Here are five reasons why a set-it-and-forget-it approach can be a bad investing strategy.

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1. You Could Be Paying High Fees

Investments come with a slew of fees and if you’re not paying attention, these fees can seriously drain your returns. If you’re investing in stocks, mutual funds or other investments on a regular basis without looking at the fees, you could be shrinking your nest egg without even realizing it.

If you don’t have time to read over the entire fee schedule, taking a look at the expense ratio can tell you how much you’re paying. The expense ratio is the percentage of assets that goes toward administrative and management fees each year. The higher the percentage, the more money you’re losing.

2. You Could Be Missing out on Free Money

These days, companies make enrolling in a 401(k) a breeze by putting those plans on autopilot and making employees opt out rather than opt in. The problem is, you might be signed up to only contribute the minimum amount, which could mean that you’re not putting away enough to qualify for the full company match. Collectively, under-contributing to 401(k) matching programs costs employees $24 billion a year in savings.

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If you’re not chipping in enough money, it might be time to adjust your contribution level. That way, your 401(k) funds can grow and you’ll be more prepared for your retirement.

Try out our 401(k) calculator.

3. You Could Be Settling for Lower Returns

Investments are fluid and they can periodically gain or lose value. When you’re investing without taking the time to analyze performance, you’re essentially crossing your fingers and hoping for the best. Smart investors know that in order to maximize their earnings on investments, they need to regularly review their portfolio to see which assets are winners and which ones are duds and to make sure that their portfolio is balanced.

4. You Might Be Taking on Too Much Risk

The general rule of thumb is that the younger you are, the more risk you can afford to take on since your portfolio has more time to recover from losses. As you get older, it’s probably best to start moving toward a more conservative asset allocation because you’re closer to needing the money in your portfolio for your living expenses in retirement.

When your investments are on autopilot, you can’t take your savings plan timeline into account. If you’ve still got the bulk of your assets in high-risk stocks in your 50s, a major market tumble could wipe out your savings. Rebalancing your holdings and reexamining your asset allocation can keep you from taking too much of a gamble with your investments.

Choose your investment risk profile.

5. You’re Not on Track to Hit Your Goal

It’s easy to assume that because you’re funneling cash into an investment account, you’re securing a comfortable financial future. But that’s not guaranteed, and if you never check on your investments you might not know about a shortfall until it’s too late.

If you’ve been chugging along with your investments but not giving them much thought, it could be time to asses whether you’re close to reaching your goals. If you’re behind, you’ll need to rethink your savings plan so you can still hit your long-term target and enjoy a comfortable retirement.

This article originally appeared on SmartAsset.com.

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