One of the most valuable investing precepts is “Know what you own.” For most people, this means doing basic, fundamental research on one’s holdings. For some, it means reaching for a cold Bud and thinking, “That’s my fifth one today. Maybe I should buy Anheuser-Busch InBev.” In my case, it means sitting in my easy chair and closing my eyes. I believe in meditation—I practice it daily—and every Saturday morning I print out my portfolio of 45 or so stocks and my sector weightings, look at them carefully, and then sit in a chair and meditate upon the data.
I promise you, there is nothing occult about the exercise. I am not looking for divine guidance, although if it were offered, I believe I would accept it. In fact, what is most noteworthy about the process is that it produces some wonderfully mundane benefits.
Watch the big picture. As a hedge-fund manager, I study arcane details about my holdings all the time. But, overwhelmed by the hurly-burly of trading and research, I sometimes lose track of the big picture.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Example: After I added to my position in Apple (symbol AAPL) this spring, the stock surged 9% in a week’s time. I was thrilled—until Saturday morning. That’s when I forgot about my outsize gains and focused solely on the fact that Apple now accounted for 8.5% of my portfolio. That was way too much, especially given CEO Steve Jobs’s health problems. I soon cut my holdings in half.
Apple’s surge coincided with a liftoff in other technology stocks. I knew tech was my largest sector weighting, but I didn’t realize until my meditation that it represented 27% of my portfolio. Did I have that much faith in a resilient global economy? Actually, no. So I cut back on tech. And I bought some shares of Anheuser-Busch InBev—though not because I had just quaffed five cold ones.
Right before the BP oil spill, I started selling energy stocks. When the spill occurred, I dumped my longtime position in Noble Corp. (NE), an offshore driller. A smart move. Or was it?
I didn’t realize until the following Saturday that the sale had left me without a single energy stock. Given that I thought the ultimate impact of the spill would be higher rather than lower prices, this posture made no long-term sense. Although each sale of an energy holding seemed reasonable, collectively they put my portfolio at risk. After all, energy accounts for about 10% of the market’s value.
If the sector rose 10% and I owned none of it, I would quickly lose one percentage point in relative performance versus the market. The following Monday, I purchased an exchange-traded fund that is a direct bet on higher oil prices.
I meditate on the individual-stock level, too. For example, I added to my position in Motorcar Parts of America (MPAA) after it announced that quarterly earnings would be great, only to see the share price drop. Then Motorcar actually announced the earnings, and the stock soared. Go figure. So now, this company, which carries a market value of only $75 million, accounts for 2.3% of my portfolio. Is that too much? Probably.
You may not have to study your portfolio weekly, but I think we all have blind spots when it comes to money management. We tend to ignore the dogs that have hurt our performance for years. Acknowledging them is just too painful. Well, meditating on your portfolio forces you to look at those dogs—and their fleas. Likewise, we can be so giddy about a big winner that we fail to notice that it has either begun to lag badly or that it has grown to encompass 25% of our portfolio. Both despair and euphoria can blind us.
So we need to do a mental, if not literal, rebalancing of our investments much more often than once a year. To paraphrase Socrates, an unexamined portfolio is not worth having. A calm but rigorous look at what you own can work wonders.
Columnist Andrew Feinberg writes about the choices and challenges facing individual investors.
-
$40,000 CD vs $40,000 High-Yield Savings Account - 3 Things Savers Should Consider NowBoth options offer risk-free methods to grow your savings. Learn how much you can earn with each, how they differ and which one suits you best.
-
I'm 51 and my portfolio is up. I'm planning to retire at 60 and want to start moving out of stocks. Is that smart?We ask financial experts for advice.
-
S&P 500 Hits New High After Oracle Earnings: Stock Market TodayAnother down day for Apple held the Dow Jones Industrial Average back, though.
-
Stocks Grind Up to New All-Time Highs: Stock Market TodayUnitedHealth stock led the Dow Jones Industrial Average amid increasing signs the labor market has not been well for months.
-
Markets Prepare for August Inflation Data: Stock Market TodayApple CEO Tim Cook is still important, but price action this week is as much about incoming inflation data ahead of next week's Fed meeting.
-
Big Tech Names Rise Above Broad Weakness: Stock Market TodaySome familiar names enjoyed solid rallies on the resolution of outstanding questions, but macro uncertainty hangs over the broader market.
-
Tech Sells Off While Trump Stirs the Fed: Stock Market TodayWe've reached another important part of earnings season, though markets remain captivated by the president, the Fed, and interest rate policy.
-
Dow Retreats From a Record High: Stock Market TodayQuietly rising since April, Home Depot stock was conspicuously constructive Tuesday as high-profile tech names dragged equity indexes down.
-
Nasdaq Ends the Week at a New High: Stock Market TodayThe S&P 500 came within a hair of a new high, while the Dow Jones Industrial Average still has yet to hit a fresh peak in 2025.
-
Stocks Swing Lower as Eli Lilly, Fortinet Spiral: Stock Market TodayThe main indexes finished well off their session highs after a disappointing batch of corporate earnings reports.
