Whether you need to invest a tax refund or simply want to see if you're on track with your investments, spring is a great time to get out the broom.
I needed to make a large contribution to my 401(k) to offset some taxes recently, so I took the opportunity to see that my portfolio is meeting my objectives.
In my case, I needed to do some rebalancing and check returns of the funds I owned against benchmarks. Then I checked to see if my funds tracked my long-term investment policy.
When I first opened my 401(k) about a decade ago, my main objective was broad-based global income and growth. Then I added a little gold for inflation protection last year. Now I've drifted off course, so it's time to ask some questions.
GLOBAL GROWTH
In my global search for a combination of income and appreciation, I need more exposure to natural resources, the staple commodities of developing countries.
When I check the International Monetary Fund forecasts, I see that the "advanced country" sector, which includes the United States, Canada, Japan and Europe, is only expected to grow 1.4 percent this year and 2.2 percent next year. That probably won't beat the rate of U.S. inflation, so I also want to add more "emerging and developing" countries from Asia, Africa, Eastern Europe and South America. This group is forecast to grow from 5.5 percent to 6 percent over the next two years, barring a worldwide downturn.
After reviewing my portfolio, I see that I need growth from underdeveloped countries and lower volatility companies that benefit from global commodity demand. So I'm considering adding the IQ Global Resources ETF (GRES), which holds energy, mining and food companies; and the iShares Frontier Markets ETF (FM), which holds stocks from countries like Kuwait and Vietnam. Each fund would make up 10 percent of my portfolio.
CHANGES NEEDED
Not only do I need to rebalance my holdings to about 10 percent per fund and add the two new funds, I need to make some substitutions to find better-performing, lower-cost funds. Here's a thumbnail review of what I own:
-iShares Core Total US Bond Market ETF (AGG) - This has been my all-in-one U.S. bond market fund. I'll keep the allocation because it's a cheap way to own a big slice of the U.S. bond market, even though it's been my second-weakest performer with a 7 percent return over a decade.
-American Century International Bond Fund (BEGBX) - A global bond fund that invests in high-quality corporate and government securities. It has not been beating its peers over the past three to five years. It's rated "1" and "2" in its Lipper Leaders rating (Lipper is owned by Thomson