It's time for a portfolio review

How did your investment portfolio perform in 2007? If asked, most of us would respond, "pretty well, I guess." You need a better answer.

By Mark B. Robinson

How did your investment portfolio perform in 2007? If asked, most of us would respond, "pretty well, I guess." You need a better answer.

To undertake a thorough year-end review of your investment portfolio, you need to evaluate it three ways: quantitatively, qualitatively and organizationally.
Perhaps the single surpassing challenge facing investors is to accumulate sufficient assets during their working years to sustain them during their retirement years – which may be 20 years or longer.

There are numerous strategies and thousands of investment combinations that can be used to accumulate wealth. But when the accumulation phase ends and you need to begin converting your wealth to income, the number of generally-accepted strategies narrows.

Quantitative Issues:

* Do you know the overall return on all your investments? Was your return competitive, and what did you compare it to? To make a comparison, you need a standard; something to measure against. We call this a "benchmark." So establish a benchmark – or a blend of benchmarks - to measure your investment's performance. Use broad-market indices such as the S&P 500 or the Russell 1000.
* Make sure that the index you're using is representative of your holdings. For example, don't use the S&P 500 index to evaluate the performance of your foreign or small cap funds.
* If you're invested in mutual funds, what are their investment styles? If you don't know, find out. If you do know, compare them to other funds doing the same thing. For example, if you have a large-cap growth mutual fund, compare its performance against other LCG mutual funds. We call this "peer group comparison.
" Are your performance expectations consistent with your objectives and risk tolerance? Expecting 20 percent returns on a conservative mix of dividend-paying stocks and government bonds may be unrealistic.
* Do the holdings in your portfolio conform to your original strategy and tolerance for risk? Did the high-quality, dividend-paying stock portfolio you started the year with acquire a lot of lower-quality, more volatile growth stocks during the year?
* Have your allocations to certain asset classes or styles drifted from the originally-set percentages thereby creating a mismatch between your portfolio and either your performance expectation or your tolerance for risk?

Qualitative issues:

* How frequently is your advisor in contact with you either through writing or by telephone?
* Is the frequency sufficient for maintaining trust and a sense that your advisor is regularly reviewing and evaluating your portfolio?

Organizational issues:

If you have several IRA or brokerage accounts, consider consolidating them with one financial services provider. This may reduce overall administrative expenses and provide better oversight. Here are three sound, business-minded reasons for account consolidation:

1. It allows for a single point of contact for all your financial concerns.
2. Eliminates the duplication, over-concentration and improper asset allocation that may result from having your investments under the control of several different advisors.
3. Combining your accounts under the control of just one advisor typically reduces overall fees – including IRA fees - and other expenses.

What typically can be consolidated into a single brokerage account?

1. Fixed and variable annuities held at the insurance company.
2. Stock certificates kept in a bank safety deposit box.
3. Stocks that are on Dividend Reinvestment Programs with the issuing companies, and
4. Mutual funds held at the fund company. Most - but not all - full-service brokerage firms allow popular no-load funds like Vanguard and Fidelity to be networked into your account.

Bottom line:

* Knowing what you own, how it's doing - and compared to what - increases your potential for consistently competitive investment returns.
* Consolidating your accounts means simplification, more control, increased return potential and lower costs.

And that's good business.

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This material is not intended to replace the advice of a qualified tax adviser, attorney, accountant and/or insurance adviser. You should consult with the appropriate professional before you make any financial commitment regarding the issues related to your situation. These projections and examples are hypothetical and do not reflect actual investment results and are not a guarantee of future results.

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