How to Tell When Your Portfolio Is In Trouble

As advisers, we speak to clients about their portfolios on a daily basis. Sometimes a client is thrilled with their investments, sometimes they are not, and sometimes they just need a little clarification on a point or strategy we have employed for them. Often the reasons people get thrown off is that they become misguided or confused by the multitude of outside voices and conversations. It can be anything; a coworker talking about their own portfolio at the water cooler, something you heard on the news, or a professional trying to invoke concern in order to sell you something. We are here to help you cut through that noise, here’s how.

Review Your Plan

Take a second to think back to what your portfolio was designed to do. Is it focused on long-term growth, preservation of capital, or providing income to be spent? Each of these things have very different indicators of success. Think about the life goals you had in mind when your plan was designed, and evaluate whether your investment is contributing toward those goals effectively. If it is not it may be time for an adjustment, otherwise you likely have nothing to worry about.

Check the Time

How long do you have before you need the money that is concerning you in your portfolio? In 225 years of trading on the New York Stock Exchange the market has taken longer than 2 years to rebound from previous losses exactly twice. If the overall stock market trends down for five years or more for the first time ever, you as an American will likely have bigger concerns than your portfolio holdings. With that in mind if you are seeing large swings in your portfolio when you are about to or are already spending down your assets that is something worthy of a conversation with your adviser.

Set the Bar

Just because your portfolio is growing or declining at a seemingly high rate does not mean it is underperforming. Take a look at each individual holding’s ranking as compared to its peers. If you own a mutual fund that is down 11% on the year, but similar funds are down 16% on the year, then your fund is performing exceptionally well. Conversely an 11% gain as compared to 16% gains by peers could be poor performance. In any given asset class there are upwards of 1,000 different funds available, so it is not realistic to expect your fund to consistently be ranked #1 over the long term, but good or bad returns relative to the average could be a strong indicator of performance.

Risk Tolerance

In many ways investing is a study in human behavior. As an investor, how will you react to various changes in the market? Are you a risk taker or a conservative investor willing to trade upside for a better chance at steady returns? A well-constructed portfolio of highly rated funds can still be a poor fit, if it does not match the investor’s risk profile. Even if the fund you invested in many years ago was properly allocated for a long time, you may need to adjust. This is not a major emergency, just a potential cause for adjustment. If you are worried or curious about your portfolio, click the button at the top of your screen for your Free Portfolio Risk Analyis. In 5-10 short minutes, you will be assigned a number that can allow us to hone in on how you should be invested in order to match your personality. From there if changes are necessary, we can help you make them. You are doing the responsible thing in saving for your future, this should relieve anxiety rather than cause it.