Posts Tagged ‘Stocks’

It’s April! Time to Spring-Clean Your Portfolio

April 12th, 2011

Have you fallen in love with your stocks?
I sit and gaze at my portfolio and examine it stock by stock. Should I hold it? It’s been 2 years, now and its stagnating. Maybe I should sell it? But it’s bound to go up. Isn’t it? These are age-old questions for investors and a tricky one for those who do not regularly evaluate the holdings in their portfolio.

It’s spring time!
Now, with the days getting longer and spring cleaning the current chore, this is a good time to go through that dusty portfolio that probably no longer fits your investment strategy. You may well end up tossing some stocks along with that old couch that your wife insists doesn’t match the living room anymore. For many, the oldest and rattiest couches, and stocks, are often the pieces with the most emotional attachment, which can make the whole exercise rather difficult.

Be unemotional
“Is the stock appropriate for your portfolio? Does it meet your quality criteria, be it dividends or company stability? All the factors one looks at to decide whether or not they want to invest in something should be used to look for things that don’t belong anymore.”

Set up a goal
Marty Wyle, head of investments, says a good way for investors to evaluate their holdings is to look at why they bought a particular product in the first place and see if that rationale still holds up. “Set up a goal. Is there a certain threshold on the upside or the downside? How is it faring compared with your other investments?” he said. “We tend to fall deeply in love with stocks that do well and quickly out of love with stocks that don’t. But if the fundamentals have changed, that’s when investors should look at exiting.”

Best choice
“If the security in question is not the best choice that we could make for that portfolio today, if I was given a blank check and told to buy something right now and I wouldn’t buy it, then it doesn’t belong in your portfolio,” Mr. Pyle said. “And don’t get rid of something because of a loss either, if it still fits with what you’re trying to do.”

RIM
Consider BlackBerry maker Research in Motion Ltd., once the golden child of the tech sector, which has seen its stock hammered for more than a year on negative sentiment thanks to intense competition in both smart-phones and tablets from Apple Inc., Google Inc. and others. “If we can look at a position as a value position, if there’s a discount to what I think that stock is really worth, it might make sense to keep it. But we have to be clear on why we’re keeping it, not just that we believe RIM is a great company, I really like it and I always will,” he said.

Not junk
“This is not junk stock like Nortel, a perfect example of a stock that fell but people refused to get rid of it because they thought they’d get their money back, but what they should’ve done was look under the surface and realize there was no fundamental reason to keep it. A lot of the resource support is not from fundamentals but from fear and speculation,” he said.

Tags: Investment goals, Junk stocks, Spring-cleaning, Stocks
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