Finance Review personal goals It makes sense to start every portfolio review with a simple question: “Am I on track?” Do you feel as if you’re in a better position today than the last time you reviewed your portfolio? Why or why not?This can be a starting point to help you determine which aspects of your portfolio need adjustment, and which you can leave alone. Once you answer this general question, start digging a little deeper. What specific financial goals have you reached so far? For goals which you haven’t yet achieved, what kind of progress have you made? What challenges have emerged that had an impact on your ability to achieve your goals?What new priorities have surfaced that should be included as new goals?The answers to these questions will help you make buy/ sell decisions for specific holdings. Of course, if you aren’t sure what “track” you’re on – you haven’t thought about or written down concrete personal goals – then it’s probably a good idea to put your portfolio checkup on hold and, instead, spend some time thinking about these big-picture issues. What’s changed in your life? Your portfolio is not an abstract entity; rather, it’s a tool that helps you do what you want to do in life. In practical terms, this means that as your life changes, your portfolio should change with it. As the second step in your portfolio review, ask yourself what changes have taken place since your last review. Is there a change in your marital status? Your health? Have you moved, or decided to spend a good chunk of the year out of the country? What’s going on with your kids…and what are the financial implications of that? No, not every life change will lead to a significant change in your portfolio. But you’d be surprised how little changes have a “ripple effect” on your finances. Check your cash The main purpose of a portfolio checkup is to take a look at the stocks, bonds, real estate, mutual funds, ETFs and other investments which you hold. But you should also take a look at the cash in your portfolio, in your emergency fund, or in your everyday chequing/ savings account. These days, it’s easy to be complacent about cash, particularly when the interest rate paid on cash accounts (and cash investments, such as GICs) is close to nil. However, liquidity is an important part of financial security. Having a cash reserve can help protect your portfolio in times of volatility; instead of having to sell in the middle of a market downturn, you can dip into your cash and, hopefully, your portfolio can ride out the storm. If you need to boost your cash or your emergency fund (or if you don’t have one at all), make it a top priority to get this done. Sure, it may be boring but, if an emergency happens, you’ll be glad that you have it. Identify fees Your portfolio checkup is a good time to review how much you’re paying for your investments. Take a look at the commissions which you pay, the MERs of any mutual funds that you own, and any other advisory fees which you may be paying. These days, there is very little reason to accept sky-high fees – the industry has evolved to the point at which there is almost always a lower-cost option available. The key word here is “almost.”There may well be times when it may be worth paying more for an investment with which you feel particularly comfortable, or for management that offers clearly superior performance, or for an investment that offers exposure to a particular sector of the market that you couldn’t access any other way. The goal is not to simply dump high-cost investments and replace them with something cheaper. Rather, it is to make sure that you’re getting value for your money. Are there cheaper options available? Maybe. Should you invest in them? Maybe. But you won’t know until you take a look. CSANews | FALL 2016 | 37
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