Are You Really “Fixing” Your Portfolio?

October 14, 2010

This past Sunday was quite interesting.  I was doing some early morning chores, washing clothes, cleaning counters and washing dishes.  You know the kind of stuff you want to knock out early so you can watch football later.  Well, as I was washing the dishes I noticed a leak at the base of the faucet.  I figured this is easy enough to fix, so I dried everything off beneath the sink and I tightened the piece that was loose.  All fixed!  However I noticed that the outlet beneath the sink didn’t have a cover on it – little dangerous maybe? Anyway as I was putting on the cover I inadvertently bumped the pipe from the sink and it came loose.  Guess what?  Another leak!

This type of thing can happen in investing. We can believe that we are doing all the right things with our portfolio; doing our homework, buying at a fair price, selling at the right time, rebalancing, etc.  But we need to be aware that even the simplest action can inadvertently result in an investment faux pas. I used to see this when clients would sell an investment without thinking through the tax implications and also how they would replace that piece of their portfolio.  Great way to look at this is, if you are managing your portfolio, be careful and take your time as careless mistakes can result in investment losses or undue tax hits.  And keep in mind, much like plumbing issues, if you’re hesitant as to whether you are managing your portfolio the right way, you can always use an expert.

Oh, in case you’re wondering, I fixed the pipe.