End of year portfolio review
I do an end of year portfolio review as an exercise and have in the past put it in my CAPS blog. The blog is usually (OK, sporadically) health-care investing focused, but not for my year end reviews.
My major accounts are IRA, taxable brokerage, and Roth. I account for the home in a end of year net worth evaluation, but not as an 'investment' since it is more about use than potential gains. I'm not counting my wifes accounts (smaller than mine but significant) or stuff like 529 plans either. The accounts split out roughly as follows:
IRA 70% Main Retirement Vehicle, invested with an allocation strategy
Roth 15% Concentrated and speculative
Taxable 15% Conservatively invested, holds emergency fund
The allocations of the IRA are a tad eclectic.
Allocation Target Actual(09end) Comment
Alt. Yield 10% 9.1% High yield Vehicles (NLY, EPD)
Fixed Inc. 10% 9.8% With risk though, Mostly via a Leveraged CEF conc. on Preferred Sec.
Cash 0% 7.4%
REIT 10% 9.9% Mostly in health care subsector
Inc. Secur. 20% 20.6% Securities with significant yield
Small Cap 20% 17.4% Mix of US based small caps, some quite speculative
Foreign 25% 19.3% Mix of caps and established vs. emerging
Sect. & spec. 5% 6.3% Current trend chasing or contrarian whim (CHK, CIM)
These are mostly individual stocks, selected mostly but not exclusively from TMF recs. I often have a closed end fund or two in the mix as well.
But I don't stop there. I also break out the Cap mix and risk level of the portfolio. The former is small (<2.5B), mid, and large (>10B). Cap Size % of Port
I like this mix currently (for me), but note that at the end of 2008 I had much less large cap (~42%) and more small cap (35%). I think this reflects a certain shyness on my part as to where the market is currently valued.
The risk evaluation is purely an assignment of my sense of the risk of an individual holding, which cumulates in sense of the overall portfolio risk level. It can comprise market conditions, current valuation, nature of the company -- anything, but is done to give me a sense of the overall perceived risk of the portfolio. Its a constantly moving and speculative target that I like to look at a couple times a year. It isn't a measurement exactly but more of an exercise done to evaluate my sentiment on my holdings and portfolio. A difficult but I've always found worthwhile practice.
Low Risk 50.8%
Moderate Risk 34.6%
High Risk 14.6%
I think this tiers well, and fits in with pyramid styled behavioral investing theory. My pyramid is flatter and wider than at the end of 2008, when I was concentrated on moderate risk (~55% - so not a pyramid at all), while high risk was curiously almost exactly the same level. So again, I believe myself to be currently taking less risk now than I was at the end of 2008, which I am comfortable with (though may be wrong about). I would note that at the end of 2007, I was at about 40%, 44%, 16% for L,M,H and boy was that wrong (BAC and GE as low risk at the end of 2007? - not in hindsight).
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