Today, Obermatt CEO Dr. Hermann J. Stern is reviewing his own portfolio, which he has built up in the four investment seasons discussed here. That already raises the first question: How often should you review your portfolio? Not too often! Dr. Stern started his first portfolio in 2015 and he's doing his first portfolio maintenance only now, after almost five years.
Is that a problem? No, because shares have no expiration date, they don't wilt or spoil and they do exactly what they should do without your help, namely generate a return and pay dividends.
Can you remember the ‘Königs-Prinzip’, the leading principle of portfolio maintenance from the last article? You have to diversify as widely as possible, buy as many shares as possible and balance this against the effort it takes to maintain the shares.
Dr. Stern has one more problem. He started a new portfolio for each investment season and now owns four portfolios. He did this to show the effects of different markets. But over the past five years, the stock market has risen steadily. The seasons hardly differ. So he's merging the first and second season portfolios and the third and fourth season portfolios together so that he only has two portfolios left.
All you need is one portfolio. The only reason for having several portfolios is when you have different savings targets. Saving for retirement or for college have different time horizons. You can, therefore, adopt different risk strategies. To distinguish that, it may be worth having two portfolios for the two savings objectives. For example, you won't be particularly nervous if the riskier (because more long-term oriented) retirement portfolio loses value because you know that the markets are likely to recover by the time you retire.
For Dr. Stern's portfolio maintenance, he uses the Google sheet that Obermatt provides for this purpose. When all the shares are entered, he sees that he owns 85 stocks, far more than the fifty stocks needed for good diversification. The two portfolios are each worth around CHF 200,000. Stocks with an investment value of less than CHF 2,000 are therefore less than 1% of the portfolios. Therefore, they are not worth the effort.
Dr. Stern has six shares with an investment value of less than 2,000 francs. Two shares are the result of bankruptcy proceedings. Debenhams in England had a case of fraud, Meyer Burger in Switzerland had a hard time against the Chinese. Stern decides to sell both shares.
There are four more stocks left. With G4S he bought too few stocks because the stock price was in pence and he thought it was in pounds. This mistake was lucky because he hardly lost anything on this stock. The other three stocks are the result of spin-outs. He already had the parent stock and received the spin-out stock for free. These are nice problems to have.
Dr. Stern will decide in the following stock investing insights what he will do with these shares. Because they represent too small an investment volume, he either has to sell them or buy more shares from the same company.
Probably the most important thing in portfolio maintenance: Don't do it too often. In general, you should look at your portfolio as seldom as possible, because the portfolio statements will only harm you.