Assessing your personal finance portfolio


The Chinese are responsible for some of the most profound proverbs known to us.

Here’s something profound; it happens to be Chinese: “Measure the wealth of a man not by what he has, but by what he needs.”

Now here is an American one, (they tend to be a little less flowery): “Turnover is vanity, hard profit is sanity.”

Where are we going with all this?

Well, roll the two up together and it will give you a good idea, because unless you are a city hot shot or a Wall Street predator (in which case your personal goals will possibly be closer to world domination than a comfortable old age), you will likely be wondering whether or not your lifelong investments are doing OK.

You may of course be quite happy to let your financial advisor decide what ‘OK’ means – and that’s certainly an option if you really aren’t interested in the mechanics of it all.

But then you will have to content yourself with a fairly generic, possibly even highly generalised assessment.

You see to assess your portfolio adequately you need to know exactly what the benchmark against which you are assessing it really are – and they are seldom generic or general.

Your advisor will have a pretty simple flowchart.

Is it making money? If the answer is yes, the next box will probably say something like “enough said”.

But you may (and more probably will) have a much more detailed set of parameters. The trick to assessing your own position is knowing what they are and this is why the approach you really ought to be taking is one that puts your personal requirements centre stage – and that isn’t always about profit yields; well at least not the size of them.

A quick word about profits; they are after all the goal but remember they cost you. Generally, the larger the profit, the greater potential cost to you in risk, liquidity (how easily can you get at your money, how quickly can you move it into something else) and peace of mind.

The latter by the way, as you will find in your later years, is a highly-prized and valuable commodity.

Now, back to the proverbs at the beginning of this article – and this thing about rolling them together.

What you need to be is realistic based on your true needs.

Accept that if you wanted to be a Wall Street player, you should possibly have made a few different career choices, so dream a little and then knuckle down to what it is you are trying to do. Your motivator is not greed; it is survival in as comfortable a manner as possible.

So you really only have three questions to ask.

Is my portfolio outpacing inflation? If it isn’t, you have a lame duck and it’s costing you to feed it.

What lifestyle do I need to support when I retire? If you expect to live the life of the idle rich and you aren’t living it now… you may just be dreaming. Assess what you need, not what you want.

How much risk are my investments exposed to? If you don’t know the answer to this, you should.

And finally, what are my holdings truly doing for me? It’s fine that Blue-Chip PLC turned over three trillion last year, but what are my shares worth against what I paid for them, what do I earn from them and what if they only turn over two trillion next year. Am I thinking long or short term?

And that last sentence just about sums it up.

Especially the word ‘thinking’


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