So at 46 years old and 5'10" 170lbs with under 20% body fat I don't think you'd call me fat but my portfolio is way overweight in 3 ways. First off, I have over 60% of my money in only 2 of the 25 equities I hold. I am lucky that those 2 holdings happen to be T and UTX, 2 stocks that define blue chip dividend paying wide moat stocks, but I am still overweight to the point that their movement defines my overall performance regardless of the broader market trends. Further that I am overweight in telecoms in general, due to spinoffs and my own decision making I now also own VZ, CTL, CLFD, VOD, and BCE. 6 telecoms out of 25 stocks means I am a glutton for phone companies. Lastly, I am overweight American stocks, other than VOD & BCE I own very small stakes in SDRL and RIG but have no additional foreign diversification other than the business my stocks may do overseas.
How this happened is simple, I sat around on the couch eating cheese wrapped in bacon ala mode and washing it down with beer instead of taking control of my investments. I used to think those were the 4 food groups. T and UTX were my inheritance from my grandfather, a former patent attorney with Otis Elevator, and my father a metallurgist with Bell Labs. Both of these smart successful men worked their whole lives to build these stakes and their efforts have helped my siblings weather rough patches in their lives by selling them in times of need. I used a bit to pay off my college loans then stuffed the rest in a dark and moldy Schwab account that I never looked at. Not having a ton of enthusiasm for Wall Street in my youth, thinking it the domain of the uber rich predatory types and fearing paying one of those sharks to handle my relatively minor amount of shares, I did nothing. So I'm damn lucky in 2 respects, 1 that those stocks were set up to drip and that the 2 companies I owned were not companies like Kodak and Enron. If they had been, I would have suffered the financial equivalent of a heart attack in my sleep.
Two things shook me out of my sloth and got me exercising financial control. First I had a kid, a kid with developmental delays who may not be able to support himself in the future. But hey no problem right, I was working making a livable wage things were good until 2008 hit. Well 10 months of trying to find work while burning through savings motivated me to take another peek at those old stocks moldering away in the dark and more importantly it forced me to learn something about investment strategies. Since I didn't want to pay someone to possibly lose my money for me, I studied what smart people do with their portfolios. Here is a simple summation of what I learned-
- Smart people study the companies they wish to buy and that they already own.
- Smart people diversify the stocks they own so no stock makes up a huge percentage of their portfolio.
- Smart people diversify the sectors they are in.
- Smart people diversify the countries they are invested in.
- Smart people seek advice from other smart people like everyone here at Seeking Alpha
- Smart people learn to minimize the fees they pay
- Smart people take action when action is required
- Smart people recognize they will make mistakes in their investments, but minimize their risks by doing the steps above, and making well reasoned moves.
I knew I didn't want to sell these stocks because they continued to grow in value and I would take a huge tax hit plus I didn't know what else to buy. I knew I didn't want to buy conservative mutual funds, which everyone said "Give you instant diversification" because I wanted the upside of individual stocks and I could accept the downside if properly managed. I knew enough to know I didn't know enough about doing due diligence to make great small & micro caps picks because my few poke and hope choices had done poorly, EFCX instead of APPL in the late 90's anyone?
So I made the simple decision to stop dripping. I hear many of you screaming "Well No DURR" but if you don't understand stocks this is not as obvious as it might have seem. This has allowed me to slowly move all of those divvys into a custodial account built of 22 wide moat divvy paying blue chips in varied sectors and countries. With the knowledge I gained from SA Contributors and other sources, I have created a much leaner stronger custodial account compared to my own flabby rotund account. I stopped worrying about timing the market and started thinking in terms of dollar cost averaging. Instead of worrying as the market sunk, I learned to look at it as an opportunity for my kid to gain larger positions in the companies he owns which increases the likelihood that he will be able to at least augment his earnings with a healthy dividend stream 10 years down the road.
For my account I still choose not to go on a crash diet but I'm taking a slow and steady approach to fixing my overweight condition. I have moved away from telecoms and bought consumer staples, utilities, big pharma, divvy paying big tech, and small amounts of individual foreign companies and etf's. I have seen the weight slowly melting away while my bottom line gets fatter. I have developed a much more disciplined approach to what I swallow into my portfolio, they must pay a divvy, they must increase my sector diversification, some picks must increase my foreign exposure, they must have a proven track record of growth, I must understand their business, the markets they serve and not fall for story stocks. With proper diet and exercise I have kept my physical weight under control, now with proper allocation and research I am slowly turning my portfolio from flabby to ripped. If you suffer from an overweight portfolio due to financial laziness it is time to get off the couch and start working out. You'll be less stressed, you'll sleep better at night and it is healthier lifestyle.
Disclosure: I am long UTX, T, VOD, CTL, BCE, CLFD, RIG, SDRL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.