in General

Time to evaluate your portfolio

There are so many things that one could do at the beginning of the year, but you owe it to yourself, and hopefully a future retirement, to evaluate your portfolio. Your stock portfolio.  Not your sock portfolio!

Although I’m not a professional investor, so take what I say with a giant grain of salt, I believe that I have some information that might help you out.  I think a lot of people just take their 401K, and divide their per pay check amount up into a nice neat number (1, 2 or 3) and put them into the stocks that at that time had the best percentage return at that time.  Or they look at all those cool looking pie charts and put the money into something there.  It’s got to continue with 25% returns right?  Wrong!  That’s what killed a lot of retirement plans in 2008!  Let me tell you a little story about that.

In late 2007 I switched jobs and had the option of what I wanted to do with my 401K.  It wasn’t huge, but it was a fairly nice 5 figure some.  Investing, for whatever reason, has always been an interest so I’d been reading and doing some investing since I was 18 (no I’m not filthy rich…as a matter of fact it wasn’t until I took over our investing that I made any money…another story).  Any how about the time I switched jobs I was reading Phil Town’s Rule #1.  It gave me a new perspective on investing that I’d not been familiar with.  It’s what got me into Netflix, but that’s yet another story.  One thing led to another and I was looking into point and figure charting (you can learn more here).  Any how I decided it was time I took over our stock portfolio and put that 401K into a self directed IRA right before the crash happened.  Now your probably thinking ‘oh damn…he lost all of his money’.  Actually no I didn’t.  Had I left that 5 figure sum in my 401K I probably would have lost a lot more than what I did end up losing. I’m basing this on a comment a close friend made to me at that time.  If I remember correctly he lost something like 35% of his portfolio (maybe more as the crash had not finished when we talked).  As for me.  I lost around 15%.  I lost and that sucks, but I’d rather lose 15% than 35% or in some other cases upwards of 50%.

So do yourself a favour and take a look at your 401K and get rid of your losers or better yet find a methodology to investing that you believe in (I’d highly recommend Point and Figure charting.  This book, Forget The Pie: Recipe For a Healthier 401K, is a good start…although I will tell you that most 401K’s…well the 3 I’ve been involved usually don’t have stocks or mutual funds that you can track the price on.  Additionally the book is partially a pitch for a service, which while useful I’m not sure is worth the monthly fee for just a 401K investment)  I think this year we’ll see a correction of some sort (just my personal opinion) and I don’t plan on losing that much! How about you?

Do you have another methodology for determining how to know if it’s time to keep your money in play or put it on the sideline (cash)?  If so I’d love to hear it.