Stay Informed About Your Investments
For many investors, the constant flow of news can lead to concerns about the state of their portfolios. Recently, as tensions arise between the United States and Iran over the Strait of Hormuz, you might find yourself questioning your exposure to oil producers and multinational firms in the region.
Even when the headlines spark enthusiasm—like developments in AI or the buzz around SpaceX’s initial public offering—investment experts advise digging deeper into your potential purchases and current holdings to ensure they align with your overall strategy.
“Before jumping into any exchange-traded fund, check out its top holdings,” advises Todd Rosenbluth, head of research at TMX VettaFi. “It’s important to see how those holdings mesh with your current stocks.”
Identifying Your Stock Holdings
If your portfolio includes mutual funds or ETFs, you might actually have shares in hundreds or even thousands of individual companies. Diversification is generally beneficial, according to financial experts, as it helps cushion against losses in specific assets.
However, Zachary Evens, a research analyst at Morningstar, emphasizes the need to know what you own. If geopolitical issues concern you, it might be crucial to understand your exposure to international stocks. Or, you may be interested in how much of your portfolio is concentrated in a single sector.
Evens recommends consulting with a financial advisor, but if you find certain exposures troubling, rebalancing toward a more diversified mix could be wise.
To uncover your holdings, use free resources like Morningstar or ETF.com. You might also be able to access this information through your online brokerage. Most ETF directories update daily, while mutual funds may only report their holdings monthly or quarterly.
“There can be delays,” Rosenbluth notes, pointing out that mutual funds may hold onto assets longer than expected. It’s also worth considering whether you’re holding onto stocks that no longer align with your values. For instance, in light of a war, you might decide to divest from defense contractors.
If you’re looking to filter your fund’s holdings, online tools like As You Sow evaluate portfolios based on factors like fossil fuel exposure or gender equality.
Evaluating New Investments
When you’re considering new stocks or ETFs, it’s essential to review your existing holdings. This ensures that any new addition fits into your investment strategy without overlapping unnecessarily.
“Investors should always assess their current allocations before bringing in something new,” Evens says. “Duplication may not be desirable, but there are times when investors might want to double down on companies they believe in.” It’s a nuanced decision that can depend on individual goals and advisors’ guidance.
For instance, if you aim to lean into AI stocks, start by examining the potential ETF’s portfolio. You might discover that it includes major players like Nvidia, Microsoft, and Alphabet, which are also present in your broad U.S. stock market ETF.
This knowledge allows you to make informed choices and strategize effectively. If you invest in an AI-focused ETF, your exposure to those tech giants effectively doubles. There’s also the opportunity to tap into smaller, more innovative companies that might not be represented in your current holdings.
Evens underscores the importance of evaluating each new investment in context. “We need to think about how it fits into our overall strategy,” he notes.
