Personal Investor: Time for your mid-year portfolio review
Diversification was more important than ever in the first half of 2018. Equity markets are normally more correlated, but political uncertainty and global trade concerns split sectors and geographic regions over the past six months.
You may have noticed that split in your portfolio with some holdings excelling and some lagging. It’s hard to buck the broader market trend but it’s important to hold stocks that outperform their peers. The best way to determine that is to compare them with the broader index.
So far this year Canada’s benchmark S&P/TSX Composite total return index has advanced 4.8 per cent thanks to a spring surge for energy stocks.
U.S. equities are having a much better 2018. In Canadian dollars the S&P 500 total return index is up by seven per cent.
Markets outside Canada and the U.S. have been a drag on global equities. In Canadian dollars the benchmark MSCI EAFE Index (Europe, Asia, Far East) is actually down 0.2 per cent for the year.
If you want to dig as little deeper to find how your holdings compare with their peers, match them up with a correlating exchange trade fund. There’s an ETF for just about every geographic region, sector and sub-sector. As an example, iShares has a Canadian dollar MSCI EAFE total return ETF that trades in Toronto under the symbol XIN.
If your stock is underperforming its benchmark it might be time to re-evaluate with the help of an advisor. If it’s over-performing and the benchmark is down, patience could be required.
If the benchmark has had a strong advance it could be time to rebalance your portfolio, trim some profits and re-invest in some laggards that show promise.