CHICAGO (Reuters) – Whenever the stock market breaches an old high – like when the Dow closed over 14,000 on Friday, the best mark since October, 2007 – it is time to look inward, not outward.
You could be happy that your portfolio looks pretty good, or you could remember how you felt in 2007 after feeling optimistic, then only to be crushed soon.
Given that you probably have a lot of year-end and tax-related statements coming in right now, you will see a lot of material to evaluate your investments. What to do next? Sell off winners? Hedge against a fall? Pick up laggards before they, too, go on the upswing?
The trouble is, most investors do not really know how to evaluate their portfolios.
It might sound simple to just look at annual returns and see how you are doing, but when I review my family’s portfolio, I ask some detailed questions. I do not always like the answers, but at least I have some guidelines for what needs to change.