How Organized Is Your Portfolio?

One of the most overlooked traits of successful investors is organization. It is a simple concept, but it would be very difficult to invest successfully without a solid framework in place. The human mind has a limited amount of bandwidth and so investors must rely on software and systems to aggregate data and analyze it. Professional investors have advanced frameworks to manage portfolios, but we often meet individual investors whose portfolios have become too complex for them to manage effectively. Some of the common issues that we see are:

  • Way more accounts than necessary or beneficial
  • Too many investments with overlapping exposure
  • Too many positions, relative to the benefits
  • Very small (seemingly random) positions that will not impact risk/return much one way or the other
  • Tax inefficiencies
  • High fees
 Portfolio Design, by Carl Richards of

Portfolio Design, by Carl Richards of

I think the above drawing beautifully illustrates how we often help new clients. A prospective client will often provide us with a ton of statements from a bunch of different institutions with a gazillion positions and we can help them consolidate into fewer accounts at a single institution. For the most part, it doesn’t make much difference to us how many positions, accounts, or institutions are involved, but it does make it much easier for our clients to view and understand their portfolio.

Without a solid framework, it would be hard for even the best investors to manage a portfolio. Most investors would be well-served to simplify their portfolios and institute some structure. More advanced investors might have more complex portfolios, but they also have more advanced systems of reporting, accounting, and analysis. I would encourage all investors to strive for more efficiency or hire a professional advisor if some guidance is needed.