portfolio management mistake

At an initial meeting, a new retiree told me, “I’m not really sure what stocks I own.” When I asked how he had put together his portfolio, he explained that some of the positions came from an inheritance, while others… “Well, I’m not really sure,” and a couple of stocks were recommendations from “this guy who sits next to me in shul.” When I asked him if that guy still thinks they’re good stocks, the gentleman admitted, “I don’t know. I don’t go to that shul anymore!”  

This conversation is a superb illustration of a huge mistake that people often make with their investments: following a “hands-off approach to investing” – in other words, not having a clear strategy and buying/selling stocks without oversight. They don’t give much thought to important issues, such as setting goals, diversification, and risk management. I understand that not everyone wants to be involved in the details of their portfolio management, but that is not an excuse for your money to go unsupervised. 

A great solution to handling money if you don’t like or want to deal with it

There is a way to have a properly managed account without having to do all the work yourself: using money managers and a Separately Managed Account (SMA). You can hire a professional money manager to make the day-to day buy/sell decisions on your account so you can sit back and watch from on high.

The simple investment plan

No matter how removed you want to be about the details of your finances, you (and your spouse) must be able to answer these basic questions:

  • When will you use your savings?
  • How much risk can you tolerate?
  • How much time do you want to spend dealing with the account?

Answering these questions will help you keep your financial focus.

How a money manager may help you

If your savings is meant to grow and be used in the long term, and market volatility makes you nervous, consider using an SMA to provide some oversight to your account. To learn more about money managers, watch a 12-minute video here Profile-financial.com/videos/SMA 

Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.

Published April 12, 2017. Updated November 2020

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