With the end of financial year less than two weeks away, many investors will be taking this opportunity to review their portfolios – it's a good idea.
The past year has seen the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) gain around 13% which is a strong result. Even more impressively, the index has rallied 33% over the past two years.
Here are four tips worth doing before 30 June arrives…
1) Re-evaluate your portfolio. Maybe you need to take some profits in stocks that have run hard and now look overvalued – but don't sell your best companies just because they've gone up!
2) Review your mistakes – Nearly all portfolios will have some underperforming stocks in them. Perhaps the share price has fallen so far that now they really are cheap, but maybe you simply got this one wrong and the best thing to do is bite the bullet, sell, take the loss and reinvest what you have left in a much better opportunity. As a wise man once said – you don't have to make it back the way you lost it!
3) Top up on quality – there are some great companies out there and some of them look reasonably priced at present. As Warren Buffett has said, he'd rather own a great company at a fair price, than a fair company at a great price. It can be easy to slip up and add a lower quality name to your portfolio – the reasons this can happen are almost endless! Now can be a good time to rectify the situation – take a look at ResMed Inc. (CHESS) (ASX: RMD), Woolworths Limited (ASX: WOW) and Brickworks Limited (ASX: BKW) – these stocks may meet your requirements on quality and price.
4) End of year tax selling –There's more to be gained by building a high quality portfolio (see points 1 to 3) than the benefits gained from minimising taxes, so consider this issue last. However once you've got your portfolio in the state you want it in, on a case-by-case basis and generally after seeking advice from an accountant, the opportunity to adjust your taxable income via realising capital gains or losses can be considered.
