Sunday Musings: Portfolio Anxiety

Just about every week, I receive reader requests to comment on their current portfolio holdings. The latest came from Martin, who had this to say:

I would be appreciative if you could make any recommendations or comments on my portfolio, as follows: I am a retiree with these vanguard funds: International growth-5%, Primecap core-21%, small cap growth-5%, wellington-3%, mid-growth-2%, small cap growth-7%, Inflation protected-7%, star fund-3%, healthcare-3%, intermediate investment grade-3%, convertible bond fund-4%, intermediate bondfund-2%. I also own Tiaa-Cref: tiqrx-3%, tiilx-8%, tibdx-3% and the balance in cash and individual bonds.

Your reply would be much appreciated as to whether these funds are suitable for a 70 year old, any that should be replaced or exchanged, etc.

While I can’t give specific advice without knowing more details about Martin, I can make some general observations.

To me, it would be interesting to know if you owned this portfolio last year and held on to it through the market crash. If so, you would know that just about all of your holdings declined sharply causing you severe portfolio anxiety.

If you set up this portfolio earlier this year, then you are sitting on some nice unrealized gains. The question in my mind simply is as to whether you are planning on holding this portfolio or if you are using an exit strategy to get out of those positions that decline with the next market pullback.

There is nothing wrong with your selection of funds if your mode of operation is to follow the trends until they end and then let your sell stops be your guide as to when to exit.

On the other hand, if you are asking me if this is a well diversified portfolio to hold onto no matter what, then my answer will be no. Last year has clearly shown that a portfolio, no matter how diversified, will go down in a bear market scenario.

Don’t participate when the next down leg starts, which it will; I am just not sure of the timing. At 70 years old, you can’t afford to take the incredible risk that buy-and-hold investing exposes you to.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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