Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Christine Benz | 07-01-2015 03:00 PM

Christine Benz's Midyear Portfolio Checkup

Christine recaps the market's activity for the first half of 2015 and provides a checklist for investors to use to evaluate their portfolios midyear.

Christine Benz: Hi, I'm Christine Benz for, and welcome to a special session about how to check up on your portfolio at midyear. During the course of this presentation, I'm going to recap the first half's market activity, and then I'll also spend some time talking about some specific factors that you can use and look at as you review your own portfolio.

I'll start by talking about where the market ended up at midyear. You can see that stocks generally outperformed bonds and foreign stocks outperformed U.S. stocks by a pretty significant margin. Generally speaking, foreign developed-markets stocks performed better than emerging-markets stocks during this period.

The reason for bonds' weakness can be pretty well explained by this slide, which shows the increase in 10-year Treasury bonds during the first half of the year. You can see that rates rose fairly significantly during the period--especially in the second quarter--and that had a ripple effect for the bond market as well as for various types of equities. When we look at the worst-performing fund categories for the first half, you can see that most of them are pretty interest-rate sensitive. So, naturally, long-term government bonds were hit fairly hard. Long-term bond funds, in general--those that buy governments as well as corporates and mortgage-backed bonds--were also hurt, but some of the equity categories that we think of as being rate sensitive were hit even harder than these bond types.

Utilities were the hardest hit. In fact, some of our equity analysts actually think that utilities represent a buying opportunity now, given the sell-off in the sector. REITs were also fairly hard-hit, as were energy limited partnership funds--these are investment types that focus on master limited partnerships. We saw a pretty significant sell-off there as well.

These categories, I think, investors widely view as rate sensitive. And in fact, they behaved that way in the second quarter of 2015.

In terms of the best-performing market segments: In a lot of ways, this is a familiar pattern, where we've seen growth stocks--and small- and mid-cap growth stocks, in particular--outperform large and value-oriented companies in the U.S. We see a similar phenomenon overseas, where foreign small- and mid-cap growth funds have dramatically outperformed large-cap value-oriented foreign-stock funds. Japan has also continued on its tear; it has extended its winning streak into 2015 and now has a roughly 10.5% gain during the past five years. So, in terms of what performed well, there are a lot of familiar patterns here.

When we look at the Morningstar Style Box for U.S. equities so far in 2015, what we see is a confirmation that growth has outperformed. Regardless of market cap, we generally see that growth stocks have outperformed more value-oriented names.

When we think about portfolio checkups--actually getting into your portfolio and taking a look and doing some due diligence about your portfolio's current positioning and the state of your current holdings--I'll first share some best practices for conducting your own portfolio checkup. One of the first pieces of advice I would give is that less is more when it comes to checking up on your portfolio. I always say for individual investors that a good checkup every quarter, maybe semiannually, or even just annually is going to be plenty. The risk of checking up on your portfolio too frequently is that the more you're in there looking at your holdings, looking at how various positions have behaved, the more inclined you might be to make changes to your portfolio. In hindsight, [you may have been better off taking a more hands-off approach] with your portfolio.

So, I usually say less is more. A quarterly checkup, at most, is going to be adequate for most investors. It also makes sense, as you conduct your portfolio checkup, to be targeted rather than spending hours and hours noodling over your portfolio. I think it makes sense to be surgical. Keep your portfolio checkup to an hour or two at most. Anything more than that, again, is probably going to encourage more trading than is really necessary.

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article