Step 2: Review Your Existing Investment Portfolios

Now that you have determined your risk tolerance, investor profile, and percent allocations to stocks vs. bonds, the next step is to gather all your brokerage accounts and retirement statements and open the latest statement for each account, if you haven’t recently done so. During the market’s precipitous drop in 2008 and early 2009, many investors were afraid to open their statements, because they didn’t want to experience a stroke or heart attack. That was not a wise decision. It illustrates that they obviously were not using any defensive tactics to protect their capital before it was too late. Now that the market has recovered a large portion of the drop, it is time for you to look at all your investments and plan ahead so that you never again have to feel afraid to open your statements.

You’ll want to analyze your existing portfolios to determine whether they reflect your current allocation preference. You may find that your existing investment allocations do not match your preferred allocations going forward. That is fine, since you can change each portfolio’s look as you make changes going forward. Now at least you have a specific target allocation to strive for.

First, focus on your nonretirement account statements. Make a list of your investments using a spreadsheet program, the price you paid, the purchase date, the number of shares owned, the current price (use The Wall Street Journal or Barron’s or go online to bigcharts.com or any related site to key in the ticker symbols to obtain the latest price), and your profit or loss on each position.

Next, follow the same approach for each retirement account, including IRAs, 401(k)s, 403(b)s, defined contribution plans, and the like. One suggestion is to put all your investments into separate portfolios available on any of the popular free financial Web sites. Another option is to use a spreadsheet to track each separate portfolio. Monitoring your positions on a weekly or at minimum a monthly schedule is suggested so that you know your total profit and loss situation at all times. There should not be any surprises.