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Your Portfolio Versus a Bunch of Stocks You Own

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April 11, 2014 – Comments (2)

I recently fielded a question on Twitter that got me thinking a bit so I decided to throw a few thoughts down on "paper." 

Question: What should I be thinking about differently when considering my "portfolio" from thinking of the bunch of stocks I happen to own?

It’s easy to lose your sense of direction and your long-term goals as you build your portfolio. The more stocks you own, the more difficult it can be to assess what you have and why you have it. That’s why I think it’s helpful for investors who own stocks to take an annual inventory of what you own, why you own it and if your goals have changed at all during the past year.

I believe that your portfolio should be a reflection of you. How you think, what you believe and what your vision of the future looks like. Investing, after all, is all about the future and the stock market is a forward-looking mechanism. So some questions to ask yourself as you look at your portfolio as a whole versus just a collection of stocks that you own:

*Are you a younger investor still in the stage of trying to grow your wealth? Or are you closer to retirement and looking to protect your wealth?

*How many stocks do you own? How many stocks do you want to own?

*What do you know?  More importantly, do you know what you don’t know? In other words, are you investing in things that you don’t understand? 

*Are you diversified to the point where you feel like you can sleep at night? Are your investments spread across a number of different industries? Or are you focused on one particular market segment? (Tech for example.)

*Do you have any positions in your portfolio that are exceptionally large in relation to your other holdings?

*What is the percentage breakdown of your portfolio in small caps, mid caps and large caps? Is it heavily weighted in any particular class?

*Can you explain what the companies you own shares in all do and how they make their money?

These are just a few questions you can ask yourself and I think it’s helpful to address them on an annual basis if for no other reason than it keeps you up to speed and current on your holdings. Ultimately your portfolio is going to be a snapshot of you as an individual and that can certainly change over time. So keeping a record of your thoughts can be very helpful in this regard. Whether it’s a blog or journal or whatever, it’s nice to be able to look back over time and see what you were thinking at any given point.

I hope this helps.

Foolish best,

Jason

2 Comments – Post Your Own

#1) On April 13, 2014 at 8:48 PM, rd80 (98.41) wrote:

I like to think of the portfolio as a team and the holdings as the players.  Just like a team is made up of people with different skills, a portfolio is made up of things with different characteristics.

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#2) On April 14, 2014 at 3:41 PM, TMFJMo (67.33) wrote:

Love that perspective rd80! Thanks for taking the time to post.

Foolish best,

Jason 

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