Spring Cleaning Your Portfolio & Finances

“I look forward to spring cleaning and putting things in their place. It's therapeutic to me.” 

— Kimora Lee Simmons

Although best known for her work in modelling, designing, and reality television, Simmons was also a successful entrepreneur and investor who reportedly amassed a wealth of over $200 million.

An impressive portfolio and net worth don’t materialize overnight—like a spotless home freshly tidied during spring cleaning, they’re the result of organization, dedication, and planning.

Strategy: Reflect & Reorient

If you’ve ever mopped before dusting, you’ll quickly realize it’s not very efficient once you see the floor is dirty again. Investing without a strategy is similarly counterproductive.

Investment strategies vary from person to person, and there’s no one-size-fits-all solution. To illustrate our point, we’d like to introduce Tammy, a recent university graduate, and Joshua, an executive nearing retirement.

• Tammy, 25, single, no dependents: Tammy decides to allocate the majority of her portfolio to growth stocks. She understands that there will be volatility, but with a reliable salary and her entire career ahead of her, she can personally afford the risk. With a stable income to meet her immediate needs, she has a longer-term investment timeline that can withstand short-term value fluctuations.

• Joshua, 60, married, two adult children: Joshua enjoyed a successful career and began his dividend-growth investment portfolio early in his working years. With a sizable nest egg, his mortgage paid off, and two children climbing the corporate ladder, his portfolio is geared towards generating income to supplement his lifestyle. There’s no real need for him to pursue growth, as his needs are short-term and disposable; reliable income is his priority.

Tammy and Joshua could not be more different, and their portfolios and strategies reflect that divergence. The key concept here is that they both thought carefully, sat down with an advisor, and created a strategy that suited their needs.

As their circumstances evolve, however, so might their portfolios. In fact, they already have. With a job secured, Tammy made the wise decision to start investing young. With his career nearing its end, Joshua and his advisor started trimming equities and increasing his exposure to fixed income securities.

Take a look at your strategy and where you’re at in life—is there a disparity? Does your portfolio align with your short- and long-term goals? If not, it might be time to reorient.

Portfolio: Declutter & Rebalance

Strategies operate on a longer horizon, whereas tactical portfolio adjustments are often made to account for circumstantial, extrinsic reasons. This might involve seizing an opportunity, protecting capital, or a combination of both. A quick word of advice: if you're 15% away from your target allocation, look for opportunities to safely bring you back in line with your strategy.

There’s a strong case for rebalancing your portfolio to offset unnecessary risk exposure, but it can extend beyond how you allocate funds between asset classes—it can also include within asset classes.

We’ll use fixed income as an example. Preferred shares have exploded onto the scene, with retail investors now pouring money into this once-unloved asset class, presumably due to the dividend payouts outpacing bonds’ lower yields. Selling a portion of these top performers and redistributing profits into discounted bonds could help you balance your fixed income allocation. Remember, preferred shares were also undervalued prior to their recent rally, and while you can’t guarantee bonds will rebound, it helps your portfolio maintain a balanced fixed income distribution.

Fees: Inspect & Reassess

Investing embodies the adage "you have to spend money to make money," but it's possible to optimize those expenses. The best way to do so is to know exactly what you’re paying for and to whom.

Actively managed funds usually carry higher total expense ratios than passive ones, but they have the benefit of allowing investors to see if they’ve beaten the benchmark or peers and, if they have, by how long and how much. That track record is important.

At the end of the day, it’s simple—if any of your expenses are chewing into your portfolio returns without adding significant value (ex. an underperforming ETF, excessive broker fees, etc.), look into alternative options. Ideally, your advisor works for a firm with complete transparency regarding their fee schedule.

Estate: Review & Reverify

The National Institute of Ageing and RBC Royal Trust conducted a study in 2022 and found that only 30% of Canadians have an estate plan and 48% have a will. If you’re not part of this minority, you should start working on them sooner rather than later.

If you're among the one-third of Canadians who have an estate plan in place, it's crucial to understand that it's a dynamic document, not a static objective.

We recommend reviewing your plan annually, or if there’s a significant circumstantial change. Whether your health declines, you sell property to fund retirement, you need to add or remove beneficiaries, the trust needs restructuring, the executor is no longer capable of the responsibility, or a combination of all of the above, make sure you update your plan accordingly.

Don't Wait for Spring

Spring is a good excuse to take inventory of your financial situation and, if needed, clean house. That being said, you don’t need a reason to make the most of what you have, and proactivity often serves investors better than reactivity.

With Bellwether, discretionary portfolio managers are consistently rebalancing and optimizing your portfolio, you'll always know exactly what you're paying, and your family wealth advisor will be there to help you keep your estate in order. In a way, it’s always spring cleaning for our clients—we just do it for them.