1. 2. Poll: Do You Spring Clean? 3. Are You Happy With Your Picks? 4. Know What You Own: Equities 5. Ask Us A Question! 6. “If we had no winter…” 7. How Sites Like Ancestry.com, 23AndMe, & Others Can Disrupt An Estate Plan

Fed’s predictions for tepid growth – and indications from the bond market – provide more signs that a recession seems to be looming. Annex Wealth Management’s Dave Spano and Derek Felske discuss.

Spring has officially been here almost one week! At this time of year, we can notice a newfound energy that we lacked during the winter. 

We’re interested to hear what our readers think of “spring cleaning.” Do you bring out the supplies at this time of year like clockwork? Do you not have a designated time of year for cleaning? Do you not clean at all?

Let us know!

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Know What You Own: Equities

This week’s MoneyDo is to Know What You Own when it comes to US Equities. It sounds rudimentary, but we find that many folks neglect to track what’s in their portfolio or haven’t looked in months or years. 

In the United States, investors are constantly bombarded with information on a 24-hour news cycle. It can cause two dangerous behaviors: 

1) a sense that staying aware of market headlines means you know what you own and knowing how your portfolio will behave. 

2) a sense of being overwhelmed that leads to paralysis. In this case, you do not know what to do with all the information, or where to start, so you do nothing. 

Unfortunately, not knowing what you own can lead to your portfolio being “out of balance” when you had not planned to be. 


Maintaining A Balanced Portfolio 

Maintaining a balanced portfolio is one of the key tenets guiding Annex Wealth Management’s investment philosophy. A balanced portfolio attempts to avoid being “overweight” in any specific investment type unless you have deliberately chosen that strategy. 

If you’re managing your own portfolio and seeking to maintain a balanced portfolio, Annex Wealth Management’s Investment Committee suggests you “know what you own” by performing rudimentary research into your investments. 

Knowing what you own requires consistent periodic research. Factors like market volatility and the type of investments you hold could each cause a portfolio that once was balanced to become unbalanced over time. 

Look Closely At Your Mutual & Exchange Traded Funds 

Remember – you may be invested in US Equities in several different ways, like mutual funds, exchange-traded funds, or individual stocks you have picked. 

Mutual funds and exchange-traded funds use a similar approach. They both pool investor money into one fund and then allocate that fund into multiple investments. They’re popular tools because it’s easier for most investors to get a diversified group of investments without having to buy them each individually.  

Where mutual funds and exchange-traded funds differ is how each manages its investments. Most mutual funds are considered active investments: they employ a fund manager who makes investment choices based on the parameters of that mutual fund. The fund manager’s overall long-term goal is to beat the representative index tied to their mutual fund.  

Most exchange-traded funds are considered passive investments. Instead of trying to beat the representative index, their goal is to replicate the index.  

You will find that actively managed mutual funds often charge higher fees in order to provide for the resources needed to accomplish their goals. Exchange-traded funds generally have significantly lower costs, since once they build their fund to replicate their index, they only need to make sure they stay inline. 

What does this have to do with balancing your portfolio? You may discover that a mutual fund you own, and an exchange-traded fund are invested in some of the same investments. While you may have thought you were balancing your portfolio by investing in different mutual- and exchange-traded funds, you really were unintentionally overweight in a particular sector or investment. 

Study Your Individual Stock Holdings 

U.S. Equities may be part of the individual stocks you own. Over the years, competition between brokerage firms has lowered costs to the extent of no transaction fee mutual funds and individual equities, making it easier for an individual investor to have access to the stock market.  

However, more access to the stock market does not necessarily make it easier to pick the right stock or to “beat” the markets. When it comes to stocks, emotion is sometimes a big driver on buying and selling, making the correct decision difficult to make. Remember back to March of 2020, at the beginning of the pandemic. Many people were fearful of the virus and the potential effects on the economy, which drove many people to sell out of all of their stocks and go to cash. Letting this emotion get the best of you resulted in missing out in one of the fastest market recoveries of all time. 

Looking At Your Portfolio Holistically 

As you research and begin to understand what you own, you’ll be faced with some portfolio-wide decisions. Consider the challenging questions, like when you should use a mutual fund vs an exchange-trade fund.  Make sure to spend the time needed to research individual stocks and develop a defined buy and sell strategy. 

You may believe you are “buying local” by investing in a U.S. equity, but in many cases, the shares you’ve purchased are likely affected by global concerns. For example, buying an American company like Apple, which has a huge reliance on products from China, means you should stay aware of more than just American headlines. 

And many American companies that sell abroad will be affected by currency exchange risk. Changes in the exchange rate between foreign currency and the U.S. dollar can increase or reduce your return, depending on how reliant they are on overseas sales. 

Perhaps the toughest part of this entire process is setting aside time through the year to regularly perform your research. Ultimately, vigilance pays off – you’ll be better equipped to determine if you’re over- or under-allocating to any sector of the market.  

While being over-invested in a “hot” sector could lead to some success, in the event of a pullback, you may find your unbalanced portfolio causing pain. 

By knowing what you own and considering how it aligns with your financial plan, you can strive for more diversity and a balanced portfolio. 

If this exercise is more work than you can handle, and/or you need a financial plan to help guide and determine your portfolio allocation, consider sitting down with us at Annex Wealth Management, where we perform an in-depth portfolio review to understand your current holdings.