Dear C.N.: Keeping track of your portfolio is like playing "Whac-a-Mole." There are so many trades in your account that it's almost impossible to know what's going to pop up or out next. During the second quarter of 2009 (April through June), your broker made 192 trades -- 86 buy trades and 86 sell trades in the 63 days that the market was open. But your account was plus 8.6 percent (35 percent annualized) even after all those commission costs, which gotta be in the neighborhood of $36,000. Frankly, I doubt that the Vanguard funds or the Fidelity funds generate that many trades in 63 market days. Now when you have trouble sleeping at night you don't have to count sheep you can count trades. And basically, during the three months this guy has handled your portfolio, your gains have matched the movement of the Dow Jones Industrials. Good grief, Chief, you could have done just as well and would have slept much better if you had owned the Dow Jones Industrial Average Exchange Traded Fund (DIA-$93.84). These shares are called "diamonds" and that "brokster" could have bought DIA in April at $75 with just a one-time commission cost.
Now I don't know how they do things in a foreign country like Miami, but this trading is shamelessly excessive and darned dangerous to your sleep patterns and financial health. Unfortunately, neither the New York Stock Exchange nor the Securities and Exchange Commission nor the Financial Industry Regulatory Authority requires stockbrokers to have a fiduciary responsibility to their clients. Close that account immediately and say a couple "thank you" prayers in the amen corner of your church that you haven't lost any money. Then find a registered investment adviser. These professionals are required to act in a fiduciary manner. However, almost everybody did well in those three months so your brokster's record isn't much to brag about. When you've turned that account into cash, put the proceeds in a money market account for a while. Cash gives you time to think and you need to do some hard thinking, including a visit to your CPA or accountant for some conclusive "thinking advice."
The first question they and you must ask is: What are my objectives? And I hope your answers are safety, income, income growth and principal growth, in that order! Your next question should be: "How much safety (risk) can I handle?" And I hope your answer is that you want minimum risk. Now your next question will be: "How much income do I want my account to produce annually?" Hopefully, your IRA income can comfortably supplement your pension and Social Security. How much income growth do you need? You may not need any dividend growth or perhaps just minor income growth. Some folks might require a "little more than the inflation rate." That may be difficult without sacrificing the safety you need. However, if you can generate principal growth of 3 percent to 4 percent annually, that should help you keep current.
These are questions that will help determine how your account should be managed and help you find a broker who will work to meet your goals, not his. These objectives will also give you a benchmark to measure your broker's progress and guide him in making changes in your portfolio as circumstances suggest.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com.
