magazine has provided
Canadians with balanced
insight into personal ;nance
issues since ;;;;. Through
an exclusive arrangement
with The Costco Connection,
experts provide Costco members with answers to their questions about ;nancial issues.
Selected questions are
answered in this column.
Costco members are offered
a one-year (nine-issue) special
introductory online subscription for $15.99 or a print subscription for $19.95 plus tax.
Go to canadianmoneysaver.ca
and click on “Subscribe,” or call
519-772-7632. Online, use
“CC” for the discount code
at the bottom of the page.
You can view a recent edition
and free webinars online at
*Please note: Opinions of the experts
may not apply to Quebec residents.
The Costco Connection Q&A
55 King St. W., Ste. 700
Kitchener, ON N2G 4W1
MORE IN ARCHIVES
search “Financial Connection.”
Checking in on your portfolio
Like gardens, portfolios need regular care
BY RYAN MODESTO
WARM WEATHER brings with it blooming
flowers and the less romantic aspects of the season, such as cutting the lawn and pulling weeds.
As the seasons change, so does your portfolio,
and this offers a gentle reminder to check in on
how your portfolio is progressing. There are a
few parallels between what the warmer weather
brings and your financial well-being.
Pull the weeds
You don’t want those pesky dandelions and
thistles in your garden, so why would you want
them in your portfolio? Find out what has not
been working over the last few months, why that
is and if better opportunities are available. Some
investors have a bad habit of holding on to their
losing stocks for too long while selling their best
performers. To draw a parallel to a garden, if you
consistently pull the flowers out, you will end up
with a garden full of weeds. Instead of favouring
the weeds, consider removing what is not working
and taking a closer look at what is working.
Water the flowers
Just because a stock has bloomed and grown
in a portfolio, it does not mean you should pull it
out immediately. Let it continue to blossom and
compound without initiating a taxable event.
Trimming around the edges in order to ensure it
does not grow too large is prudent, but you do
not need to sell winners outright. Often, winning stocks are winning because something good
is happening at the company. So give that stock
some water, and let it grow and flourish in your
portfolio while simply trimming if it gets too big
and begins to encroach on your other holdings.
Maintain the yard
While pulling the weeds and watering the
flowers, it is also important to take a few steps
back and get a look at the total portfolio. Are the
holdings still doing what you intended them to
do? Are they helping you accomplish your goals?
Is something where it shouldn’t be or is there a
corner of the portfolio that has been neglected?
Take time to ensure everything is in order and
makes sense from a higher-level perspective.
Taking a few moments once or twice a year to
make sure everything checks out is prudent.
Take a “vacation”
As summer approaches, it is time to start
planning the next vacation. While doing so, consider letting your portfolio take a trip to far-off
lands as well. Adding diversified exchange-traded funds that provide exposure to European
and Asian economies can help add to performance and stability. Since stocks in different
geographical places have lower correlations to
one another over longer periods, a portfolio can
see stocks improve in one area, while they decline
in another. This helps offset out-of-favour
regions and ensures a portfolio is not a bet on the
outcomes of a single geography or economy.
Plant the seeds to ensure a fruitful summer
The last thing most people want to worry
about is ho w their portfolio is faring. To avoid the
worry, make sure that everything has been taken
care of. Ask yourself the following questions.
• Has your adviser checked in and updated
you on performance this year? Are the fees you
pay justifying the service you receive?
• Have you made any contributions to savings vehicles such as a Registered Retirement
Savings Plan, Tax-Free Savings Account or
Registered Education Savings Plan?
• Have you put any additional cash back to
work so it is generating returns for you? Do you
currently have enough cash to meet your needs?
• Are you using dividend reinvestment plans (DRIPs)? Many brokers allow you to automatically
reinvest dividends back into the
stock at no cost. Even better, some
individual companies allow you to
participate in a DRIP and buy their
stock at a discount from the current
share price. This allows you to essentially dollar-cost average into your
holdings while saving you the time,
effort and cost. C
Ryan Modesto, CFA, is CEO of
;i Research Inc (; iresearch.ca).