Moving homes, your retirement portfolio
Your investments: After 12 years of renting, my wife and I decided to buy an apartment.
US dollars Photo: Thinkstock/Imagebank
After 12 years of renting, my wife and I decided to buy an apartment.
finished the renovations (well it’s Israel, so do you ever really finish the
renovations?) and Tuesday morning the movers came.
It’s important to note
that the apartment we bought is directly underneath the one we have been
renting, so our “big” move is basically going down 14
Nonetheless, we decided that since we were moving downstairs, we
would have movers take the heavy stuff, and we would move the rest of the
clothes, dishes et al by ourselves. We have two weeks until we need to be out of
our rental, so in order to put things in their proper place and not have to go
through the whole “boxes everywhere” process, we felt this would be
As we go through shelf by shelf and drawer by drawer we see how
much crap we have managed to accumulate over the years. Never-used wedding
presents that were so bizarre they couldn’t even be re-gifted, numerous
“beginning to count numbers 1-10” books (ever notice they all use farm animals),
T-shirts vintage 1990 from running a Starbucks 8-kilometer run for the beach
back in Seattle, suits that are in good condition but about six sizes to small
that I kept in just in case I get back to my senior year of high school weight,
and so forth – you get the picture.
I never would have imagined how
similar this process is to investing.
Last week I met with
someone who inherited a portfolio from his mother.
He was in his late 50s
and starting to plan for retirement. He was looking to be much less aggressive
and more focused on generating income. In the portfolio were some of the usual
suspects, such as AT&T and shares of all the spinoffs that were known as the
Baby Bells, some of which have gone bankrupt. There were some once highflying
tech stocks from the Internet bubble, such as JDS Uniphase, which lost about 99
percent of its value; and the once-hot First Solar, which traded at $300 per
share four years ago and now sits at $15. While reviewing the portfolio it was
like a trip down memory lane of every hot sector on Wall Street over the last 40
Well-know investment manager Rick Ferri sums it up: “Ask
experienced advisers how many portfolios they’ve reviewed that lack philosophy,
strategy and discipline and you’ll make them laugh. That’s because almost all
portfolios lack these elements.
Investors say they’ve got them, or think
they have them, but their portfolios don’t show it. They hold a smorgasbord of
randomly collected investments that have no relationship to each other except
that they all tend to be popular ideas from days gone by.
eye will spot this trail of trends reaching back many years and can estimate
each one’s purchase date. When I review a portfolio, I’ll often I say something
like, ‘I bet you bought this emerging-market fund around the summer of 2007 and
that commodity fund in early 2008.’ I’m right most of the time. How do I know?
That’s when other undisciplined investors were buying the same funds!”
I can’t stress enough the importance of getting your portfolio current. I don’t
mean making the same mistakes of yesteryear and buy what’s hot today – that’s
not getting current. Rather, investors need to sit down and figure out what
their financial goals and needs are and then create a portfolio that will help
get you there.
For retirees looking for supplemental income, a portfolio
of some wind-power and camera stocks probably doesn’t make sense. So-called
dividend champions – companies that have raised their dividend consecutively
over decades – for example, such as Clorox, Proctor and Gamble or Walgreens –
may be more appropriate.
Maybe a globally balanced portfolio is more
suitable for you depending on your goals.
The point is that in order for
your money to work for you in an efficient manner, you need to take the time to
get rid of the junk, understand the purpose of the portfolio and then use a
disciplined strategy that suits your own specific financial
Aaron Katsman is a licensed
financial adviser in Israel and the United States who helps people with US