Day 13: Conduct a "Quick and Dirty" Portfolio Check-Up
Degree of difficulty: Easy to moderate
Week #1 of my financial fitness programme helped you gear up, first by checking up on your household's financial health and then by getting organised. The tasks in Week #2 focused on investing well for short- and intermediate-term goals. In the last two weeks of our financial fitness regimen, we'll focus on a key concern for most investors: successfully building and monitoring a long-term portfolio.
A good starting point is to take a snapshot of where your portfolio is right now, with an eye towards flagging any notable trouble spots. The best tool for the job is Morningstar's Premium Instant X-Ray. Simply plug in tickers for each of your holdings (use CASH for cash), then hit "Show X-Ray" for a look at your portfolio's stock/bond/cash mix and breakdown by investment style, sector, and geography, as well as any stock overlap.
That's a lot of information, so as you digest it all, run through the following checklist and take notes as you go along:
1. Is your stock/bond/cash mix in line with your targets? (Don't have targets? Look here for guidance.) Take note if your allocation to any one asset class is more than five or 10 percentage points higher or lower than your targets. If it is, it's time to rebalance.
2. Are you making big, inadvertent sector bets? Compare your weightings to the FTSE 100's (provided in X-Ray). Again, look for big bets of five or 10 percentage points or more.
3. How about investment-style bets? Are you spreading your bets between large value, large blend, large growth, as well as mid-cap and small-cap offerings?
4. Is a big share of your portfolio in a single stock? To see, click on the "Stock Overlap" tab. Positions amounting to five or 10 percentage points higher or lower than your targets can ramp up your portfolio's risk level.
5. Do you have an adequate emergency fund? Make sure you have a bare minimum of three months' worth of living expenses in a cash or cash-like vehicles.
If you have extra time, click the individual security names at the bottom of the main X-Ray page to see data and analyses for the funds in your portfolio.
Return to the article: "The 30-Day Financial Fitness Plan".