Finance We Deliver! Wintering in Florida, Arizona or California? By Individual Driver Door to Door or Truck For more information about our services call: We pick up your vehicle from your doorstep and deliver it to your winter destination… and get it safely back home when you’re ready. www.torontodriveaway.com The Premier Driveaway Service in North America! I n t e g r I t y • h o n e s t y • c o u r t e s y 416-225-7754 Toronto Drive-Away Service Nationwide Inc. TrusTed since 1959 Review performance A big part of the portfolio checkup is to take a detailed look at the performance of your individual holdings, and of your portfolio as a whole. This is much easier than it used to be, with many websites offering a quick way to view performance figures for most publicly traded equities (and, indeed, entire portfolios of stocks, bonds and funds) over varying time frames. Chances are that your current wealth advisor or online broker already has this capability. Looking at raw numbers is fine, but it will only tell you somuch. Instead, take a look at relative performance by comparing a given holding to an appropriate benchmark. In the case of a mutual fund or ETF, that’s typically a passive stock market or fixed-income market index. In the case of an individual stock, it may be an index, or perhaps a competitor operating a similar business. Once you’ve crunched the numbers, it’s time for evaluation. Ask yourself: which investments (if any) are lagging their benchmark? Have they been doing so for a considerable period of time? How has performance measured up against your expectations? Any investment that has been lagging its benchmark for three years is worthy of further examination, which leads to the next step in your portfolio review. Trim losers As painful as it is, one of the most important goals of your portfolio review is to identify your “losers” – investment ideas that didn’t work out, funds that have underperformed their benchmarks, investments that no longer align with your long-termfinancial goals – and eliminate them from the portfolio. Of course, you’ll want to ensure that you’ve given an investment enough time to demonstrate that it really is a loser. Three years is usually a good rule of thumb. If an investment has been underperforming for that long, you can be pretty sure that it’s time to move on. Yes, such an approach will mean that you miss out on the occasional “comeback” that beats the odds and crawls back to break even. But, more often than not, selling (and, if you’re selling in a non-registered account, taking a tax loss) and reinvesting the proceeds in something more promising is the better move. Build a “watch list” The final step in your portfolio review should be a brief glance into the future. Ask yourself if there’s anything that piques your interest – an idea that you’ve heard about, an investment trend or theme which you’ve been keeping an eye on, or even a stock that a friend mentioned a couple of months ago. Maybe there’s something about which you may have to make a “sell” decision in the coming year. In either case, put the investment on your watch list and use the coming months to gather further information. The point is to help you avoid the sudden, reactionary moves that can derail a portfolio. If you’ve already identified some of the opportunities and challenges on the horizon, there’s less temptation to make quick “emotional” moves. A checkup on yourself One final word about the portfolio checkup: in some ways, it’s not only a checkup on your investments, it’s also a checkup on you and how well you’ve been able to manage and maintain your finances. Now that you’ve taken a close look at your portfolio, you’re in a better position to evaluate your own performance. Ask yourself: ▶▶ Have I devoted enough time to my finances/investments over the past six/12 months? ▶▶ Does my portfolio consist of a random collection of stocks, mutual funds and other investments (financial clutter)? ▶▶ Do I know what my financial goals are? Or how much I’ll need to accumulate to reach them? ▶▶ Do I know how to evaluate my portfolio’s performance? Do I know when to sell? If you’ve answered “no” to any of the above questions, it might be time to delegate some or all of the job to a professional. This may end up being the most important piece of information which you get from your checkup. CSANews | FALL 2016 | 39
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