Get a grip on these straighforward issues and your mutual fund portfolio will certainly stay in good shape.

1. Your fund portfolio: 5 questions to ask
Get a grip on these straightforward issues and your mutual fund portfolio will certainly stay in
good shape.
Author : iFast Content Team
I have been following Chuck Jaffe’s column for years. This week, I thoroughly enjoyed the one
titled Father’s Day investing advice where he very interestingly pens down 5 mutual fund
questions that his dad regularly quizzed him on when he called for a long chat, which invariably
used to be on Father’s Day.
Here are the mid-year portfolio evaluation queries. In fact, they serve as a good guideline for all
of us who have mutual fund portfolios.
1) Do I have anything that lost too much?
Losses make all of us nervous in different degrees. It varies according to our temperament and
how much we have invested in that particular loss-making investment.
Since Jaffe’s father was no exception, they re-framed the question by defining how much
downside he could sit through, and for how long.
“Beyond raw performance, examine relative results; there were several times where my father
held a fund to diversify his portfolio, saw a stretch where the returns made him uneasy but
never triggered a sell because the fund was still among the best in its peer group. Not wanting to
change his asset allocation, he had no reason to expect to do better by changing horses. That
said, this question reaffirmed the range of performance he was looking for, and the reasons why
he allocated assets to fit his needs and desires.”
2) Do I have anything that made too much?
Sounds odd? You are right. Jaffe himself admits that it is a nice problem to have. But Jaffe’s
father was wise in recognizing that out-of-character moves change an overall portfolio.
One may want to dig deeper to find out why a fund is delivering a superlative performance. It
could turn out to be taking much more risk that you had bargained for. However, it need not
always be a case where you have to cut loose. Jaffe suggests that if something spikes upward,
you may want to lock in the profits, or re-balance to target allocations.
3) Has anything changed with the funds? Are any going on or coming off “the watch list?”
Rash decisions are not advisable in investing. So a fund creating concerns from the above two
questions moves first to a status of “one to watch.”
Jaffe explained that once his father began to lose confidence in a mutual fund, he began looking
for confirmation that he was right, or a sign that he was being too rash.
“Funds that went through manager changes or any corporate upheaval were automatically
moved to the watch list, if only to make sure that the character of the investment did not change
in the months before our next portfolio review.”
4) Is there anything new I should buy?
Even though his father’s portfolio was diversified, Jaffe explains that there are areas of the
market that an investor might want to cover, or new investment issues that might be better than
what’s in the portfolio.
“As my dad got older, he wanted to do more with less, meaning his preference was for fewer

2. funds, but in recent years – as interest rates stayed low and he wanted to diversify his income
streams – we looked at new dividend-oriented exchange-traded funds and some closed-end
funds to at least consider whether something new would get him re-excited about the overall
portfolio.”
As a general rule, Jaffe’s father followed the “look but not touch” rule. But just knowing what is
out there and making a conscious decision not to go for the new and improved is better than
sitting still with a portfolio wondering if every new issue might look better than what you’ve
got.
5) Should I do anything differently in this market?
Jaffe gives a final bit of advice. A solid portfolio is a mix of good funds, an appropriate asset
allocation and a strategy that makes you comfortable no matter what the market is doing. For
average investors, market conditions don’t warrant a portfolio overhaul.
With that in mind, however, if the market’s direction or potential is making you lose sleep at
night – or has you dreaming of bigger things -- it’s okay to adjust to your sleep factor or to
indulge your winner’s imagination to a point.
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