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Dale Jackson

Personal Finance Columnist, Payback Time


With the tax deadline behind us and summer doldrums ahead, it’s an ideal time for a portfolio spring cleaning. That means taking stock and assessing how market turmoil during the pandemic affected your retirement savings and preparing for whatever happens as the economy rebounds.
√ Balance and rebalance
All markets are different but the advantages of a balanced portfolio remains the same. The right weighting in each asset class and a diversified array in each major sector and geographic region will limit the impact of isolated losses when they occur, and keep your portfolio open to opportunities when they pop up.
It’s also important to keep a portion of your nest egg in fixed income, despite yields that are near zero. Guaranteed Investment Certificates (GICs) pay about one per cent, as an example. That doesn’t even compensate for inflation, which is becoming more of a threat as the economy reopens, but it provides a cushion if equity markets tank. It comes especially handy in or near retirement when you need cash for living expenses. The proportion of your portfolio that should be in fixed income is whatever makes you comfortable but should increase as you get older.
It’s also good to keep a bit of cash on hand to jump on opportunities as they arise.
√ Trim the winners
A good way to generate cash while you’re rebalancing your portfolio is to trim the winners. Broad equity markets performed surprisingly well over the course of the pandemic considering the global economy was locked down to various degrees.
Sectors like technology performed well as people lived their lives on the internet. If you hold tech stocks that have had big gains they could have an oversized weighting in your portfolio. It could be time to trim profits to generate cash and rebalance your portfolio by deploying it in under-represented sectors as they recover.
√ Chuck the losers
Real estate and resource stocks took a hit during the pandemic. That doesn’t mean all real estate and resource stocks are bad. Both have been recovering and the best stocks in each sector will make the biggest gains.
There are bad stocks in every sector. If you have a loser, compare its performance with other stocks in the same sector. If there are no obvious short term reasons for its underperformance - even if it’s a technology stock - it might be time to take a loss and deploy the cash toward something else.
√ Look for themes
If you invest for the long term, think about long-term trends such as the lasting impact of working from home beyond the pandemic or the shift toward clean power.
A more specific example is the strong Canadian dollar, which has well surpassed 80 cents to the U.S. dollar after tumbling below 70 cents at the onset of the pandemic.
Canadians are notorious for holding an oversized portion of their portfolios in resource-heavy Canadian equities. The recent recovery in the resource sector, and the resulting strong loonie brings a double opportunity to dump or trim Canadian holdings and build a U.S. dollar trading account to purchase more global equities.  
√ Let that income stream flow
With fixed income stuck in the mud, the best opportunity to generate income is through stocks that pay generous and consistent dividends. They aren’t as safe as GICs or government bonds but traditional dividend stocks, like the big Canadian banks, are yielding about four per cent annually right now.
Dividends are often an afterthought but for the long-term investor they really add up over time. Most companies, mutual funds and exchange-traded funds (ETFs) that pay dividends offer dividend reinvestment plans (DRIPs) that automatically use dividend payouts to purchase more shares or units.  
√ Speak with a qualified advisor
Finding the best dividend payers, identifying themes, buying and selling, and creating a balanced portfolio isn’t easy for the average investor.
A qualified advisor should have experience in all areas of portfolio management and access to the best research and financial information. If you already have an advisor, or are looking for one, the period between RRSP season in February and summer vacation is a perfect time for a chat. Be sure to discuss fees and determine if the cost will justify long-term return potential.
Sometimes, spring cleaning goes easier with help from a professional.