Your investment fitness checklist for 2012

Yes, it’s that time of year again. A time for lists – Christmas, New Year’s resolutions, among others. Add one more: your 2012 investment fitness checklist. If you want to wake up on New Years Day knowing that your portfolio is already at work just the way you would like it to be, use this checklist as your guide.

Investment fitness

The last time I wrote an article on this subject was exactly four years ago, just as the Dow was peaking at 14,000. I did not know a recession was underway and did not know that the financial system would soon be teetering on the brink. Still, my end-of-2007 fitness checklist was simple, and I believe, right on target:

1)    Recognize and control leverage

2)    Affirm asset allocation

3)    Index (stop trying to beat the market)

4)    Simplify (if you don’t understand it, don’t own it)

5)    Favor liquidity (be wary of alternative investments that may be hard to sell)

2012 checklist

In addition to these fitness tasks above, which I feel work regardless of market conditions, I would add three items for 2012. All three exercises can be brief, brisk, and invigorating for your investment portfolio.


We espouse, preach, advocate, and otherwise strongly recommend diversification for all portfolios at Osbon Capital. Is your portfolio truly diverse? An easy way to check is to complete the chart below. Ask your investment advisor to do it if you don’t have the time. Completing your diversification chart is like taking your blood pressure, pulse, and weight – these are basic vital signs. If there are major holes in this chart, now is the time to fill them as asset allocation is the leading determinant of your portfolio’s risk and potential return.

(Values in this chart are for illustration only and do not represent recommended allocations or allocations of existing client accounts.)

Control expenses

One surefire way to increase investment returns: cut expenses. Commissions for buying and selling securities are a good place to start. We just analyzed total commissions for Osbon Capital clients in 2010 and 2011 and I am pleased to report that actual commission costs were, on average, 3 basis points (3 one hundredths of one percent) of portfolio value per year.  That’s about as close to zero as we can get them!

Fund expenses  are another fat target, ready for reduction. In this regard, index ETFs are way ahead of the investment industry. SPY, the $90 billion State Street ETF that mirrors the S&P 500, operates with an expense ratio of 9 basis points.  VOO, Vanguard’s $100 billion ETF version of the same index, goes even lower, with an expense ratio of 6 basis points. These are orders of magnitude lower than industry norms – good news for investors.

Know your goal

Since we practice goal-based asset management for individuals we encourage all clients to articulate their investment goals in one clear, concise sentence. This is not nearly as easy as it sounds. We spend a fair amount of time discussing risk and return expectations on the way to crafting that one sentence. Examples include: “I want to retire comfortably at age 60,” “I am willing to accept a modest return in exchange for minimal fluctuation in my portfolio value,” and “I am investing for my children’s grandchildren.” What’s your goal?

I would be pleased to help you with any of these exercises so you can start 2012 in the best possible shape.


This article may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.

Nothing in this article is intended to be or should be construed as individualized investment advice. All content is of a general nature. Individual investors should consult their investment adviser, accountant, and/or attorney for specifically tailored advice.

Any references to third-party data or opinions are listed for informational purposes only and have not been verified for accuracy by the Adviser. Adviser does not endorse the statements, services or performance of any third-party vendor without specifically assessing the suitability of a third-party to a client’s or a prospective client’s needs and objectives.

“Any securities mentioned in this article are for illustrative purposes only and may or may not be owned in our client portfolios.”

Expense ratio and commission data are based most recent information available. Future costs may be higher or lower.

An investment cannot be made directly in an index. Past performance is not an indicator of future results.

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