Pattie Lovett-Reid: Knowing when it's time to revitalize your portfolio
When was the last time you looked closely at your portfolio composition?
In a perfect world, once you have created a well-balanced portfolio, your job is done. That doesn’t mean you shouldn’t rebalance from time to time. Rebalancing is the key to buying high and selling low. The problem is, in some cases, we are tempted to buy on the latest tip or recommendation. We keep adding to our portfolios to the point where we can have an unwieldy arrangement of investments that become near impossible to manage.
Adrian Mastracci, a discretionary portfolio manager, uses this analogy: an avid gardener starts snapping into action once spring arrives ready to revitalize their weathered landscapes – assessing the much-desired upkeep and pulling pesky weeds, trimming overgrown shrubs, and watching for unwanted critters. You get the point: it might be time to breathe new life into your portfolio as well.
Here a few considerations:
- Reassess your goals. Have there been any life-altering events pertaining to your job, family situation, health, or even potential tax considerations?
- Given your tolerance for risk, is your portfolio truly aligned to who you are as an investor? Do previous investment selections still make sense, or is a second unbiased opinion warranted?
- Do you own too many stocks in your portfolio? Is it growing like weeds? You need to prune back because in all likelihood you have too much diversification and overlap.
- Do you fully understand the investments you are invested in or even why you are invested in them? If not, questions need to be asked in order to assess whether they are appropriate for you as an investor as opposed to the flavour of the month.
Going back to Mastracci’s gardening analogy, put on your gloves and get involved with your nest egg. Like your garden, you get to shape it, freshen it up, and with any luck, enjoy some new blooms.