Posts Tagged Portfolio Review


As each year fades into the next, the financial “experts” seem to be everywhere in the media.  They present their recommendations as to how to invest for the year ahead.  But think of the absurdity of it all.  For instance: how can anyone give meaningful advice to a large number of investors, with each having different needs and resources; what crystal ball enables them to predict next year’s financial markets; and have they built contingencies into their recommendations for unforeseen changes in trends?  And, Don’t look for a report card, by the way, on last year’s predictions.  You surely won’t find it!

There are certain tax and retirement planning moves that you might discuss with your own professional advisors, such as:  taking capital gains if you have losses, from prior years, to reduce or offset this year’s gains tax; increasing your contributions to tax-deferred retirement plans; taking advantage of balances in your medical flexible spending account (which you might lose) by buying new eyeglasses, a CPAP for sleep apnea; physician-prescribed shoes for diabetics, etc.  Such examples as these, however, are not investment advice, per se, rather they are just common sense personal finance ideas.

When it comes to investment planning, a portfolio review is always a good idea.  Do so, in consultation with anyone you seek advice from; but, there is nothing special about any date or time of year.  For procrastinators; however, Year-End, a major birthday, the build-up to filing your tax return, a year or two before retirement, etc, might provide that necessary nudge to get your finances in order.  Whatever you do, however, don’t wait until its too late to get your house in order!



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Personalities who present the financial news on TV, investment gurus, and journalists covering the business beat for newspapers, all seem to be grasping at straws these days—trying to fill-in air time or page space.  Much of the world, however, has been focused on the Climate Change Conference in Paris over the past couple of weeks.  And the markets are mostly quiet!

Otherwise, nothing much has changed, at least not that wasn’t on our radar screens before the financial markets began their swoon on December 4th.  In fact, today the Dow Jones Industrial Average ended the day UP by 103.29 points, to close at 17,368.50.  That’s quite a bit higher than during last August’s market “correction” (a ten percent decline).   Although the Dow still remains 3.4% below its 2014 Year-End close, that difference would just be considered part of the normal ebb-and-flow of the financial markets.  There is nothing magic about either Year-End or Month-End Prices!

So, when nothing new of any consequence is going on, and the world has been mostly focused on the climate, that’s when just plain old “uncertainty” can creep into the mix.  From my observations over the years, I believe that many market participants can actually accept bad news better than uncertainty.  That’s because they can make adjustments for negative events; but, they just don’t like not knowing what might come next.  But, what I find particularly frustrating these days, is that we do indeed know what to expect, the options and the limited severity. the Fed has telegraphed them several times over the past few months.

As the Media searches for something to talk or write about, invariably they keep coming back to the Fed’s Open Market Committee meeting which begins this Tuesday and will end, like clockwork, at 2:00 PM on Wednesday.  The big question seems to be: “Will they, or won’t they”…raise rates?  Fed Chair, Janet Yellin, has even recently confirmed that the FOMC probably would raise the “Fed Funds” Rate (which banks charge each other for overnight loans of excess reserve cash) at this meeting.  But, promptly at 2:15, Ms. Yellin will announce the Committee’s decision, explain the rationale behind the change(s), if any, and then answer journalists’ questions.

The Fed Funds Rate has been maintained between 0.00% and 0.25% since 2008. Chairman Yellin has also suggested that, if and when, the Fed does raise rates, it would do so deliberately, very gradually and that she expected them not to rise substantially in the near future.  So, why all the hand-wringing?

Recently, I have had several people, perhaps investors who only look at their portfolios on an occasional basis or, maybe they heard or read about the recent market slide, and didn’t place things into any sort of rational context.  By all means, review your portfolio if you have concerns and speak with whomever you look to for investment advice.  If they are recommending a number of major changes, however, I would suggest getting a second opinion.  Or perhaps another broker! Some investment salespersons just see market volatility as a chance (for them) to generate commissions!


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This post is somewhat of an Inner Mind-Game essay:  What did you think, when did you think it, and why?


There was a day last August when the Dow Jones Industrial Average was trading, before the markets even opened, as if it would open (at 9:30 EDT) down by more than 1,000 points, or roughly seven percent.  I did a quick gut check, and sub-consciously told myself three things:  I won’t do anything until I know what is happening, and why; I knew that our investment goals and preferences hadn’t changed recently; and I knew that our current mix of securities was such that I could feel comfortable with it.  Furthermore, I realized that no one really knew, for sure, which way the markets were headed anyway!

Now, I don’t say these things, mind you–a couple of months after the fact–just to pat myself on the back. But, through my decades in the financial markets, I have witnessed:  the “Stagflation” of the 1970s; President Richard Nixon’s resignation in 1972; the near bankruptcy of New York City in those same years; the 50% drop in bond prices soon after the Fed raised short-term rates by two full percent on one day in 1981; the stock market crash of 1987, when the Dow dropped 22% on that day; the bursting of the “Dot-Com Bubble” in 2001; the 9/11/01 Attacks and The Great Recession (4Q07-1Q09).

That last one, the Financial Melt-Down of seven years ago was, by far, the most grueling for me personally.  That’s because I had to work through it everyday for eighteen months and:  confront those markets head-on; advise my clients and calm their fears; and keep an eye on my own (then pre-Retirement) portfolio, as well.  So, if you expect to keep money in the financial markets in the future, be prepared for another roller-coaster ride or two…or three or…!

Every once in awhile, I think of the people who, during that Financial Melt-Down of seven years ago, panicked and shifted whatever was left of their financial assets into cash. Now, if you were in your 20s or 30s, you would still have had plenty of time to reestablish your investments and continue saving for retirement.  But, if you were in your late 50s or 60s, a shift into cash–probably earning less than one percent up until now–you are merely eroding your future spending ability.

For those who panicked and called their securities firm to liquidate everything–in any of these scary times–the potential of an actual person questioning your motives and having you speak to an advisor or broker who knew you, might have actually provided you with some alternatives to consider.  In many cases, the markets often start to bounce back in the next day or two, as on that day last August, when they recovered half the 1,000 point expected loss before the market actually opened.

Getting back to those folks who liquidated in 2008, think of how much better shape their finances would be in, if only they: left perhaps half of their money invested; or shifted those funds into more defensive securities (consumer staples, health care, utilities, etc), but still kept it in the stock market.  Also, if you do panic and liquidate money in tax-deferred retirement accounts, at least leave it in those accounts, even if in cash.  That way, you won’t have to pay taxes while you decide whether to get back into the markets or not.

Its most important that you have a plan, so you will know why you are investing.  Understand exactly what you want your investment portfolio to do.  What are your goals (i.e. children’s education; retirement; a first home; etc.)?  Your risk tolerance?  Time frames for achieving each goal?  Do you have other financial resources to fall back on?  Also, do your homework and get to, at least, understand the  basics of investing.

Lastly, always monitor your portfolio on a regular basis and re-evaluate it, from time-to-time. Reaffirm whether you are still satisfied with each of your current securities?  If you make changes, have a reason for doing so.  And lastly, if you deal with an investment representative, speak with them regularly, be prepared to ask lots of questions and expect them to provide comprehensive and understandable answers.

But, its important that YOU personally get involved with your portfolio.  A little knowledge helps overcome market fears!




Today, while I was watching the pre-market opening for stocks on TV, my wife sat down and, as she divided her attention between her iPad and the TV, she commented that Netflix was at 105.  Now, that surprised me since we do not own any of that stock.  So, I asked her: “As compared to what?”, and she just shrugged her shoulders.

This brings up an important point.  Many novice investors only seem to think about the markets on an occasional basis.  Maybe they heard or read that the Dow Jones dropped by 200 points, noticed that the value on their monthly account statement had declined, or read that a stock or mutual fund they own had dropped. But, in order to actually understand what is happening in the financial markets, you need to place things in context.  How does what is happening to one of the securities you are interested in compare to other companies within its industry and, then, how does that correlate within the overall market?

A good way to begin to understand what I am suggesting is to become familiar with the “Sector Tracker”, on the linked Sector SPDR web site:  Sector SPDRs are exchange-traded funds (a form of mutual fund) that segregate the various stocks within the S & P 500, by their various industries.  The Tracker is inter-active, and it allows you to click on the various timeframes, and to review the historical performance of the S & P 500, as well as each of the individual sector ETFs.

As you consider the possibilities, try to understand what caused the overall index to perform as it did, and also why one sector has performed differently than another.  Also, remember that this chart shows past performance, and it does not attempt to reflect what will happen in the future.  But first, let’s consider the S & P 500 across, let’s say, the one month, one year and five year timeframes.  That performance was: -4.35%, +2.48% and +89.96%, respectively.  Well, about a year ago, anticipated weakness in developing markets raised some concern within developed economies, as well.

Now review how the Energy and Materials (Commodities) SPDRs did at the time when, over the past year, the prices of copper, gas, zinc, oil, etc. have plummeted. Within the Health Care sector, stocks have held-up comparatively well, because Baby Boomers are getting older and more people now have acquired health insurance under Obamacare.  And lastly, the Utility industry, which generally maintains a debt-heavy capital structure, has benefitted from the Fed’s holding interest rates down for quite some time.

When you consider the vagaries of the financial markets over time–among the different industries, or with any particular stocks or funds–you might begin to question your past investment moves.  For instance, why didn’t you sell-out before?  At least, part of it?  Should we have shifted into better performing sectors?  Moved more into bonds?

Before you even start to invest, try to learn, at least the basics, so that you will have some concept for making suitable investment decisions.  And also, you cannot go back in time!  So, if you did liquidate your portfolio to any great extent, how will you know when it is time to re-enter the markets?  As many people–especially retirees--who panicked back five-to-seven years ago have found, cash and CDs are still earning virtually nothing. Unfortunately, cash and equivalents will not keep up with inflation over the long-term!

Remember that there can also be much more to investing than just what is going on in the U. S. markets, and you cannot possibly be aware of–or truly understand–all of the extraneous factors.  Is OPEC opening or closing the oil spigot?  The intricacies of the foreign currency markets?  The Chinese stock market bubble?  What’s going on inside the head of North Korean Dictator Kim Jong-Un?  Even the partisan bickering on Capital Hill?  But, don’t feel alone if you feel lost, the Media certainly doesn’t have a clue either!

NOTE: If you are committed to learning a little more about the investment basics, you might consider checking the Investment Boot Camp (IBC) series on this blog. For many investors, the current markets are somewhat of a Baptism by Fire!   For our overseas readers, much of what I am suggesting would also have similar applications for your markets, as well.


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Today, the stock markets in the US dropped-off a bit (the DJIA, S&P 500 and NASDAQ were down from 0.29% to 0.51%) after having reached the highest point in four years–back to where they were before we entered the Financial Crisis (toward the end of the Bush Administration), when Lehman Brothers went into Bankruptcy, on September 15, 2008. The three major European Markets (Germany, UK and France) were all UP, in the 0.50-0.75% range. Pac-Rim Markets were mostly mixed, ranging from -0.16% to +1.30%. Perhaps, more Smoke and Mirrors from the EuroZone!

So, why were the US Markets down? I believe that the real underlying theme was people taking profits after seeing their money grow (some 9.5% in the S & P 500) over the past three months. Remember that there are people who saw very substantial losses a few years back, especially if they invested more aggressively than they should have. It was kind of like the gambler who, after a big loss, puts everything on the table to get their money back. The securities markets, if you know what you are doing–or have good advice–certainly do have risk; but, they are not quite like rolling the dice.  The real risk, however, is just shifting everything into Cash–because (at today’s low interest rates), you will not keep up with inflation.

Let’s say that you have earned a sizable amount of your 401(k), IRA or personal accounts back since the 2007-09 Melt-Down. Re-assess your personal situation (certainly, you’re several years older). Include your anticipated Social Security and Pension Payments, if any. Maybe park some in Cash, and Bonds or Bond Funds, and continue on-going monitoring of your portfolio. After having retired in February, I have the time to check my portfolio everyday.  Not everyone can do that; but, at least be sure to keep in touch with it.

During the Financial Melt-Down, I had invested pretty much all of my personal funds totally in stocks and stock funds (or ETFs). Obviously, that was not something that I recommended to my clients; however, I did shift some assets into more defensive-stocks. A defensive stock or fund, would be one that invests in necessities: Food; Energy; Clothes; Health Care; etc. As I approached Retirement, however, I shifted to a somewhat more conservative portfolio.

If you work with a Financial Advisor, check with them to arrange a Portfolio Review. Include your Company-Sponsored Retirement Plan (if you have one–or more), as well as other securities accounts, annuities or cash accounts. Always look at the Total Pie as being your Retirement Nest egg. Lastly, every several years, you should reduce the risk in your portfolio, by a little bit–depending on market conditions at that time. Its like the train, gradually slowing-up, as it moves into the Station–Your Retirement.  Park it slowly.


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The answer, to me of course, is YES! I always like to speak of the Markets in terms of plurals; because, I believe that there are Markets within Markets. For instance, the Dow Jones Industrials might be rising and the Russell 3000 (smaller companies) declining, in Times of Uncertainty, when people are pursuing a so-called “Flight to Quality”. Others might be making a Sector Rotation, from let’s say Financials to Industrials, if they believe that that move might be beneficial. Similarly, shifts from Stocks to Bonds, or vice versa, might be appropriate.

Sometimes, people view economic news, or actions by the Federal Reserve, differently. To me, it is somewhat like when you are approaching a bridge that is stuck in the upright position. Should you wait, or turn-back and take another route? Who knows for sure; but, you do what you think best, at the time.  You cannot digest information that you do not have.

For instance, let’s assume that the FED took unexpected action to Stimulate the Economy. Two rationale people might react differently. The one might invest more aggressively, to take advantage of the FED’s Actions, while the other might reduce their portfolio since, they believe, the Economy is in worse shape than they had thought.

Now, so far, we have assumed that investors have reasons, although based on differing opinions, behind their investment decisions. But, you surely know people who act on “hot tips”, buy what has been around forever or because some personality is involved in the company. Now, occasionally, these approaches might work out. More often however, they are a sure way to lose money. Just remember: brokers are paid to push their products, National Cash Registers and Polaroids can only be seen at the Smithsonian and personalities get paid for their apparent involvement.

I suggest that you include these rules in your investment decisions: do your homework; consult your Financial Advisor and ask lots of questions; don’t be swayed by someone else’s decisions (without following the rules); focus on the future–not past performance; ask yourself if the projections truly make sense and don’t be afraid to sleep on a decision. Lastly, if it sounds too good to be true–it probably is!


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Over many years in the Financial Services Industry, I have been quite amazed at how cavalierly some people select–or have been assigned–a Financial Advisor. Sometimes, it seems to be the Luck-of-the-Draw. But, do some work before agreeing to work with a particular person. Keep in mind that it is that particular FA who you will be looking to for guidance–not the Firm. A number of Mutual Fund Companies and Securities Firms have brochures that you might read, regarding how to Select a Financial Advisor. Here are a number of points that I would suggest that you consider in selecting a FA:

1. What are the FA’s Credentials–academic and work experience? Some foundation in Accounting (for understanding financial reports), Economics and Finance should be included. The FA should be willing to send you a biographical sketch. Discuss it with them in detail. How might his or her background fit your needs?
2. Be cautious of relatively new FAs. For instance, someone who graduated from college and entered the financial markets two or three years ago might lack proper perspective. Monday, March 9, marked the third anniversary of the market bottom for most Developed Market Stock Indices. Some new FAs might think that their advice has been stupendous in view of how their clients‘ portfolios have done over the last few years. There is an age-old maxim in the financial markets: A Rising Tide Lifts All Boats. So, a good bit of the performance, since early 2009, was probably due to the markets, in general.
3. What types of clients does the FA cater to? Minimum size and type account(s) preferred, if any? Does the size of your account(s) fit that Business Model?
4. Are there particular investment products and services that the FA has valid expertise in? How about ones that he or she avoids due to lack of a working knowledge? Does this fit with your anticipated needs and preferences?
5. Did the FA Interview you to gain knowledge as to your Investment Profile–Age, Expected Retirement Plans, Financial Resources, Risk Tolerance, etc? Did they ask follow-up questions and encourage you to ask questions, as well? It is very important that you both take the time to go through this process in detail; because, it will set the stage for any investment recommendations that the FA will provide–both at the onset, and along the way. Your relationship, in the early stages, will be somewhat of a learning experience for each of you.
6. What does the FA expect of his or her clients–returning Email and telephone calls, face-to-face meetings, being realistic about anticipated performance, etc?. The CFP (Certified Financial Planner) Designation is nice to have; but, it doesn’t compare to years of real-world experience. Just think of what both FAs and investors have learned from; the Dot-Com Bubble bursting (2000); the World Trade Center attacks (2001); entering two Wars in the Middle East (2003) and the so-called Great Recession (2008-2009). Experience does count!
7. Do you wish to focus your Financial Plan somewhat on Insurance Planning? If so, make sure that the FA has the appropriate Insurance Designations and experience. For Tax and Estate Planning assistance, your FA cannot generally offer such advice (even if they have the required credentials); however, make sure that they understand the subject matter. They can be invaluable in explaining and reviewing your needs when you meet with a CPA or Attorney.
8. Let the FA know if you have special communications preferences, speaking in the early morning before your work day begins or after the close of business, will the FA be available at that time? Do you prefer to receive investment calls at home, at your workplace, cell phone, etc. Do you prefer communication through Email?
9. Is the FA capable and willing to provide securities analysis from Standard and Poor’s and other analytical firms, Morningstar reports (Portfolio Snapshots and Securities Detail Reports), market letters (from their Firm, outside research and mutual fund companies)–and educate you as to how to review them. At first, they might appear to be in a foreign language; but, after you have seen them a few times, and with a little guidance from the FA, the smoke will start to clear. I believe the FA should want to provide them; because, the reports–when reviewed with him or her–will show the rationale in any investment recommendations that they may make. Always ask questions!
10. How independent are the investment recommendations, which the FA makes, from influences of their Firm? Are they encouraged to focus on either their Firm’s Securities Inventory (for Individual Stocks and Bonds) or its Proprietary Mutual Funds? Are they permitted free access to deal with a wide range of different Mutual Fund Companies and Annuity Products offered by a number of major insurance companies?
11. Will the FA provide a detailed and specific proposal as to how they would suggest investing your money initially, or how they would recommend re- shuffling an existing portfolio? Review it with them and discuss how often you might expect to review it with him or her–in person or by telephone.
12. Lastly, if you ever find that the FA is not returning your phone calls, not giving complete answers to your questions, adequately explaining the markets or your portfolio’s performance, or just acting in your best interests, let the FA understand that you need a quicker response, more clarification, etc. You need to both be on the same wave-length. However, if you are still not satisfied, ask to speak to the Firm’s Resident Manager.

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