Five Numbers Every Investor Should Know About Their Portfolio

Do you find yourself engaged in a conversation sometimes about your portfolio and someone asks you what should seem to be a simple question?   How much of your portfolio is in stocks and how much is in bonds?  Do you know what your biggest holding is in your portfolio?  Why did you pick that XYZ mutual fund? Or XYZ stock?  Nobody expects you to become an expert in investments, but as the CEO of your family finances you sure want to get yourself educated enough to be able to answer some important questions.  Here are five numbers every investor should know about their portfolio.

  1. What your risk level is currently – There are a whole number of ways to calculate risk depending on the angle you are taking with the question.  You aren’t going to be asked to know your beta, your alpha, or your Sharpe ratio because they are for the experts to know.  However, you should be able to tell people on a scale of 1 to 10 where approximately you are from a risk perspective with your money.  Yes, you know you own a few Fidelity or Vanguard funds and your 401(k) is in some 2035 retirement target or age-based fund.  But, do you know what would happen to your portfolio if the S & P 500 went down by 10% or if international stocks went down by 20%?  Most investors know reward, but they don’t know risk.
  2. What is your stock/bond/cash/real estate mix or what is known as your asset allocation – If you are putting your cash into different lanes on the highway, wouldn’t it be useful to know how much money you put in each lane?  You can get very granular with asset allocation, and I have seen some charts that show up to 20 different asset classes.  For the most basic of numbers, challenge yourself to learn how much money you have in stock, how much in bond, how much in real estate (minus your house) and how much in cash.  Remember, that your asset allocation should be indicative of your goals, objectives, time frames, risk tolerance, etc.
  3. How much money is in your single biggest holding – As of the last couple of years, I have seen many investors start to load up (or they have held on for a while) to one or two positions that have grown significantly in value.  The reason they don’t sell these stocks is because they let the capital gain tax drive their decision to sell (unless the money is in an IRA).  You may have had significant run ups in prices in your main technology stocks and now you should start asking yourself if you have too much money in just one stock.  Some people have won over time with a single stock strategy, but many have lost their shirt.  Just ask people from the dot com bubble and from 2008 where some stocks just never recovered.
  4. What’s Your Cost – No matter what commercials you see on television, there is no free lunch to do business.  Nor is there a product that NEVER makes sense for anybody.  The important thing to know is what your overall cost is to run your investment portfolio and whether or not you are getting financial planning advice with your investment cost or you are not.  Investors have a hard time separating the two.  In this analysis, you are looking at the costs of your funds, etf’s, trading costs, and dollars that you may be paying out of pocket.  Companies that tell you they can do it all for just $4.95 a trade simply aren’t telling you the whole story.  You can’t run a business on $4.95 a trade.
  5. Your overall rate of return – This is a very tricky question because risk often dictates reward.  Hopefully, you have aligned your strategy to achieve the return necessary to reach your goals for the least amount of risk versus shooting for the highest return you can get on your money.  Sometimes, a 5% return can be a great return especially if you have chosen not to take a ton of risk.  However, if you put all of money in technology stocks or funds, you should expect to do better over time.  It is important once a year that you check in and see how you are doing.  Do NOT be swayed by a friend, a work colleague, or someone that tells you that they did 3x better than you did for return.  People who quote their investment return are like people who come home from Vegas and never tell the truth about how it really went.

If you want to set up a time to discuss your five numbers or talk about your portfolio, please go to oXYGen Financial to set up an appointment.

About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

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My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

Background and qualification information is available at FINRA's BrokerCheck website.

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