Changing of Season is Opportune Time to Evaluate Quarterly Performances
By
Anthony Rhodes
So, you’ve lowered that thermometer, replaced those
heavy bed coverings, and transitioned your wardrobe to be more reflective of
the warmer climate…all sure signs that spring is on the horizon. And although
you don’t look forward to the upcoming regiment of annualized “Spring
Cleaning”, the habit of performing such activities is a sure reminder that
winter is finally behind us, and that it’s time to begin preparing our
households for the coming inevitability of seasonal change.
In keeping with this spirit, how many of you will
include your investments as a customary portion of your spring-cleaning affairs
this year? Doesn’t their importance warrant inclusion within such duties, also?
Or, are you one of the many who only check on your portfolio when the market
takes a disastrous turn for the worst? This week, we’ll take a look at the
prospect of using the changing of the seasons as a benchmark for evaluating the
quarterly performances of our investments. And will offer some suggestions to
remind that not only should our households be made ready for seasonal
adjustments, but more importantly, our portfolios should, as well.
The Seasonal Forecast
Even if you are a long-term investor, it’s still a
pretty good idea to assess your portfolio holdings on a quarterly basis. That’s
because, although your positions may not change over a longer period of
time, the allocation of your portfolio may have to shift, to be more
reflective of the current economic environment. Remember that the
circumstances, which dictated the outcome of last quarters’ winners, may not
necessarily produce similar results for the same investments this time around.
Due to the ongoing ebbs and flows of economic trends, certain sectors of the
market will always outperform others, and the quarterly analysis of your
portfolio should better prepare you to adjust for these conclusions. Your first
step should be to find out just what the economic forecast for the incoming
quarter is likely to be. This can be achieved by either talking to your
financial advisor, or by reading various trade publications and Internet search
sites. Once you gain a consensus opinion of exactly which sectors are poised
for growth, focus on increasing your weightings towards those groups within
your portfolio. And if such sectors are not represented within your overall
allocation strategy, it might be a surefire sign, that you are not properly
diversified.
A Breath of Fresh Air
When you don’t perform a quarterly review, you may
find your portfolio to be lagging down with some stocks, whose better days have
long since come and gone. Their consistent poor performance not only negates
the successes of your past winners, but also siphons from the gains of your
newer ones, as well. This is why it’s always good to inject some “fresh air”
into your portfolio by conducting an assessment, at least quarterly. Keep in
mind, that when certain segments of the economy are in decline, it could take
months, or even years for them to recover. And if such sectors have
representatives within your portfolio, your wait could be equally as long. This
brief, periodic assessment will go a long way towards insuring that your
portfolio remains free of such situations. By simply monitoring your
investments, and adjusting your winners and losers, you begin each incoming
quarter anew, without the draining influences of the past.
As we close the final chapter on yet another mild Midwestern winter, our thoughts naturally center around the fun-filled prospects
of the upcoming warmer seasons. With spring finally upon us, and summer, merely
months away, it’s difficult for us to find interest in the mundane aspects of
monitoring our investments, and taking the time to schedule such acts, equally
as un-wanting. But before we get carried away with our blissful contemplations
on the future, let’s not forget that it’s the preparations of the present,
which makes such activities possible. And that a healthy, more profitable
portfolio is a welcome addition to any changes the seasons will bring.
(Anthony
Rhodes is the President and owner of wealth management firm The
Planning Perspective www.theplanningperspective.com)
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