Don’t clutter your portfolio | Fin24
 
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Don’t clutter your portfolio

Dec 17 2019 14:39
Simon Brown

I still clearly remember my first JSE transaction like it was yesterday, but it was October 1987, and I had to call the broker. 

I practiced what I wanted to say, but still was as nervous as heck as I dialled the number, getting it wrong the first time. When the phone was answered I asked for ‘my’ broker.

All I got in response was a gruff “yes”. I was terrified but managed to blurt out what I wanted to buy. They reply was another equally gruff “yes” and the phone was put down, leaving me with no idea if I really had bought shares or not.

What I didn’t know was that my Durban broker would have then forwarded the order to Johannesburg where a floor broker would have executed the order. Then a confirmation statement would be printed and posted, arriving a few days later to finally confirm the trade had actually taken place.

Back when I was starting out in the market the daily newspaper was the only source of JSE prices, and those were yesterday’s closing prices. New listings I discovered every quarter when the new JSE handbook came out and I compared the new one to the older version. 

Access to data was pretty much zero. A few lines in the JSE handbook, and I would write to the company secretary asking for the latest annual report. 

They’d happily send it, but by the time I received it in the post it was outdated by months – not due to slow postal delivery but because it was published three or four months post the actual year-end date.

These days I can buy almost anything in almost any market with a few clicks of my mouse. That’s progress, astounding progress. But it’s also a curse because the ease means we end up owning all sorts of things that maybe we shouldn’t.

When exchange traded funds (ETFs) first arrived I basically bought all the new ones as they came out so that after a decade, I had around a dozen different ETFs in my portfolio. It was a mess.

Just because you can doesn’t mean you should. Just because somebody else owns it doesn’t mean you need to own it. You have a strategy and it’s yours, uniquely yours. It serves your purpose and, as such, other people’s ideas shouldn’t matter to your plan.

Year-end is a great time to clean out the portfolio. Especially have a look at what you hold that was maybe a fear of missing out (FOMO) purchase. Does it really fit? 

If you can’t make a real case for it fitting within your plan, then sell it – regardless of price. This also applies to those once angel stocks that have crashed and that you’re not selling because you’re so far under water you don’t want to take the hit. 

Yet, the truth is they’re not recovering, and they are causing you emotional pain. We’re better rid of them. Sell them ASAP and never look at them again. In essence, get rid of the portfolio clutter that serves no purpose or causes you pain. 

But you also need to stop cluttering your portfolio to begin with. I have written before that you need to know what it is that will trigger you to sell. It may be price or, for the true long-term investor, it’s more likely fundamental. 

But know your exit plan and stick to it, always stick to it. And avoid FOMO. There is always something doing better than your portfolio. There is always some new hot sock or sector that is exploding. But you don’t need to own them if they don’t fit within your strategy.

portfolio  |  strategy  |  jse
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