Time for a Portfolio Review? Yes, Right Now

Written by: Jack Boylan

Why do I say right now? What about the end of the year or after the summer or after the Mad Men season finale. Well, those are all good times too! But, let’s be honest: did you do it at the end of last year or after spring or after the Modern Family season finale? I thought not, but there is more to it than simply pointing out (admittedly a bit smarmily) that human nature tends to put off less than fun events such as a portfolio review. Plus, with the Dow more than doubling from it’s lows of the “great recession” the review may be more fun than it has been in a long time.

While it can certainly be argued that the markets have simply bounced back to their old highs with a mild sprinkling of advancement on top of that, it can also be looked at as a remarkable run. And since no one knows what the future holds, what is the big rush? There is never (almost, anyway) a rush to move money around, but this time period does allow for some clear thinking. Those of you that patiently held onto your stocks for the last four years or so, now have an opportunity to position yourself properly. If you were one of those who felt that they had a little bit too much in the stock market circa 2009, then now would be an ideal time to position yourself appropriately.

Another good reason is that you probably don’t feel like it. After all, you are just now seeing your portfolio “breaking even” from where it used to be and now you feel like it is a good time for all of that patience to pay off with some serious profits. That is all probably true, but you should also be aware that it is what everyone else is thinking also. That is because there is no greater urge in investing than to “break even”. If brokerage firms made a dollar every time someone wanted to wait to break even on a losing investment they might have avoided the bailouts. There is nothing wrong about wanting to “break even”, it’s just important to note that it is human nature. And with everyone’s portfolio somewhere in the “break even” vicinity it is an excellent time to take a close look at your investments.

That’s because the next stage of human nature is the fact that almost no one actually sells once they “break even“. As mentioned, the usual reaction is to want to reward yourself for all of your patience and wait a little longer for the “profits”. Hey, don’t get me wrong, it sometimes works. A certain stock may have turned around their fortunes with nothing but smooth sailing ahead. But another stock may be just drifting higher over time and once again got ahead of itself ready to get hit again.

Well, now we are at that point that many, many people have profits or are at least at the ‘break even” area in their portfolios. That means that a lot of people are thinking about pocketing some profits. But it also means that those same people don’t want to be stuck with losses again. A musical chairs scenario could be setting up with many people rushing for that last seat before the portfolio turns into a loser once again. Again, no one can possibly know what the stock market will do in the future. But it might be a good idea to take a hard look at your investments. Are you overweight in some areas? Do you have more equities than you are really comfortable with in another downturn? Well, now is your second chance. You have made a great comeback with your stocks and you can take an assessment of your situation. And now that you are back to where you were those many years ago, some of the emotion can be taken out of the decisions ahead. Did you feel that you had way too much in stocks in 2009? Well then, you probably have too much now. In a case like that it will almost certainly be better to be early than too late.


Time for a Portfolio Review? Yes, Right Now

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