The vernal equinox, that date in the spring where the day is exactly as long as the night, arrived yesterday. Many call this the ‘first day of spring’, so on that note, I thought I’d talk a little about spring cleaning of your portfolio.
Traditionally, spring cleaning meant (especially in cold climates) dragging everything of the house and cleaning the house from top to bottom on the first warm day of the year. What I do for my clients, and what you should do yourself if you have assets that aren’t being managed by someone (such as a 401K), is to take a look at everything individually and ask:
1) What is this doing in my portfolio (i.e., what niche is it filling)?
2) What is the goal of this asset (e.g., cash flow via dividends or interest, or long-term growth) and is it achieving that goal, or would something else achieve it better?
3) Has it grown too large? This is specific to individual securities: for anything over roughly 5% of the total, consideration should be made to trim that position back.
4) Has the asset allocation (the % of bonds, stocks, commodities, real estate, other) strayed too far from my original objective? Over the course of the last few months, with stocks’ growth rate, the answer is likely yes. As the S&P 500 is up over 25% for the last 6 months, if you were (for example) 50% stocks and 50% bonds, you could now be well over 60% stocks and needing to trim this back near (in this example) 50%.
Please feel free to call me if you’d like to discuss this further!