Wednesday, November 05, 2008

Reviewing your portfolio is critical!

During last week I attended a breakfast seminar at Kooyong Tennis Club organised by the Churchill Morgan Global and Davenports and sponsored by Perpetual.

Bridgette Leckie, Head of Investment Markets Research at Perpetual gave an excellent explanation as to why the current economic crisis had arisen and went on to annunciate the implications, things to be concerned about (especially our position in the economic cycle) and encouraged us to think about the opportunities presented by the carnage.

The bloke next to me was a self-funded retiree in his early 60's. He told me that he had stopped monitoring the share prices because they were too depressing. He was waiting for the bottom.

He explained that when the bottom was reached he'd be able to assess his situation, decide how much he had to live on for the rest of his life and take appropriate action.

I suggested to him that if I were in his shoes I would not be waiting. I would be undertaking a detailed review of each of his investments to discover the underlying economic activity on which that investment's value was based.

Then with understanding in my brain I would be reading what the analysts had to say about that company and its basic economic activity. A visit to a financial advisor would be high on my priority list.

I would be reviewing the portfolio because this market presents a number of opportunities and I would want to know whether my investments were in 'opportunity areas'. If they weren't then I would be sorely tempted to re-arrange my portfolio to capture some of those opportunities.

I know that people are reluctant to move at all in this market but I suspect that some investments have been undermined forever and they should be carved out of your portfolio. But you wont discover these until you do the exercise.

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