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New Year Investment Review and Rebalancing

Posted by Senan

With the dawning of the new year, now may be a good time to give your investment portfolio the once over. Based on prevailing economic and market conditions it is wise to periodically rebalance where your money sits in terms of asset, sector, and geographic allocation. you need to review your decision for getting into the position in the first place and evaluate whether or not that reason still holds.

What will gold do this year? Oil? Asian equities? Bonds? Cash? Argentinean beef?! Property? whatever your goal, bear in mind that trading frequency can affect returns due to charges such as commission, stamp duty (currently 1% in Ireland), and exchange rates.

My Current Position

General
 - €200,000 property
 - €3,800 U.S. energy (nuclear) equity
 - €2,900 U.S. financial services equity
 - €2,600 U.S. chemicals equity
 - €300 Global telecoms equity
 - €1,500 Irish energy equity
 - €2,100 U.K. pharmaceutical equity
 - €600 U.K. financial services equity
 - €1,600 Spanish equity
 - €7,000 Cash
 - €7,000 Managed Fund (equities)
 - €13,000 Managed Fund (with-profits)

Pension
 - €43,000 (30% China fund, 40% Emerging Market fund, 10% Europe fund, 20% Biotech fund).

Actions

- Hold. The above allocations are obviously skewed heavily towards property (about 60% or so), an ailing sector. However, due to trading costs (not to mention negative equity) changing this portion of my allocation is not immediately practical. Also, the property is historically rented out approximately 95% so I'm happy to shoulder the risk here.
- Hold. The 3 U.S. equities are recent purchases and represent my view that the U.S. should inevitably lead the world back to growth.
- Add. The telecoms shares are Vodafone relating to the Eircom flotation. These do not have significant value and so I'm happy to continue to reinvest dividends.
- Possible Sell. The Irish energy was my first foray into direct share purchases and really is blind speculation. It's Providence Resources. I've actually done quite well from it already. I bought at 3p, sold 66% at 8p and continue to hold the remaining 33%. I think my portfolio should hold oil position(s). I'm not overly comfortable with this company though so this would be a candidate for sale, with a view to purchasing either a big brand (such as ConocoPhillips or Chevron) or a much riskier play such as BMB Munai.
- Hold. The U.K. pharma is Vectura. This tanked by 50% after I first bought it (a few years ago) and is still struggling to get back to my purchase price. I believe the product and management is good and so I will hold as I have no other position in this sector.
- Add. U.K. financial services is Standard Life, a legacy of demutualisation. Similar situation to Vodafone - not a significant stake, so I'm happy to hold and reinvest dividends.
- Hold. Spanish equity is Iberdrola. Again, I'm bullish long-term on energy so this is a keeper for me.
- Add. 7,000 cash is already earmarked for replacement car so I'll need to build up the same stake again this year. Ideally I would hope to get this to 10,000.
- Probably Sell. The managed fund is based in Australia (bought when I lived there), but is based on global equities. This is something I have neglected. I think the charges may be high and so I will look carefully as selling this stake. I'd be better off probably putting the money into an ETF or something.
- Hold (would sell if I could). Finally the with-profits fund is a thorn in my side, but to avoid early encashment charges I much hold onto it until 2012.
- Hold. I'm happy with my pension fund distributions.

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