Rick in Maumee, Ohio, has used stay-at-home time during the coronavirus pandemic to “clean up my life.”

   There was a de-cluttering of the house, followed by a purging of his financial files (in accordance with guidelines I laid out in a recent column). He reorganized old family photos and papers, putting them in books and tossing the excess and the outtakes. There was the cancellation of subscription services he long-ago stopped using, a dumping of premium cable television channels he says no one in the family watches, an emptying of the garage, and even a cleansing of the spice rack (“Can’t recall why we needed celery seed, but the ‘best by’ date was in the last century,” he said).
   Next on the agenda: cleaning out his investment portfolio.

   He doesn’t want to sell everything to start over, or even to overhaul his asset allocation; he just wants to tidy up and simplify his holdings.

   “I’ve bought a lot of stocks and mutual funds over the years, but other than the ones in my retirement plan at work and my Roth IRA, I haven’t really added much money to whatever I bought,” Rick said in an e-mail. “I mostly buy things that interest me, hold them forever and usually buy something else the next time I have money to invest.”

   Like many investors, Rick doesn’t have a portfolio so much as a collection.

   Whether it is investors who “buy what I like” without much strategy behind it, or who have evolved to a core strategy but kept their early purchases even if they don’t fit in, plenty of people have messy portfolios.


   Tidying up an investment portfolio in an organized way helps investors improve their investment process and results, as well as their personal efficiency. It’s a process I went through myself just a few years ago, which is why Rick’s question on how to do it struck a nerve.

   For anyone looking to simplify and improve their investment holdings and results, here are five things to consider:

   Is it worth my time and effort to hold this?

   As your portfolio grows, so should your “minimum investment.” This is the smallest amount you are willing to commit to any individual investment.

   Maybe you started putting $100 or $1,000 to work every time you had some cash to invest. That’s what Rick was doing in his 20s and 30s; now he is in his late 50s and he has a big portfolio; a $500 investment – and he has a few of them from the old days, plus tiny amounts of some shares spun off of things he bought – now amounts to far less than 0.1 percent of his total portfolio.

   Setting your account minimum at 1 or 2 percent of your total holdings – so that Rick would be somewhere between $5,000 and $15,000 – helps you get rid of the stuff that’s not worth the mental effort to be a good owner.


   It forces you to make a decision on small holdings; either be willing – better yet, excited — to buy more to get the position up to your minimum, or sell it.

   Would I buy this again today?

   The problem with this question is that most investors are poorly equipped to answer it, especially someone like Rick who amassed many positions over the years.

   I have always recommended that investors write down their reasons for buying a security, the specific characteristics that led them to pull the trigger. In my case, the sheet with that reasoning goes into my files, so it can be reviewed in the future to see if the stock or fund still meets the criteria I bought it for.

   Rick, like most investors, never made such a list; he’s now deciding from memory.

   List of reasons or not, if you like stocks with solid balance sheets and consistent dividends, and something you bought years ago has since cut the payouts amid financial struggles, it’s safe to say it no longer meets your standards. Likewise, a mutual fund that has seen its Morningstar ratings tumble or performance falter after a long-time star manager retired.

   Investments typically get over a high bar when you first pick them; lowering your standards over time is a good way to hang on to your disappointments.


   What about capital gains?

   One reason to keep a long-term holding in a taxable account is to avoid paying capital gains.

   Rick, for example, has stocks he bought years ago where a few hundred dollars has grown to $1,500 or $2,000.

   That means most of his proceeds from a sale would be capital gains; he’s not anxious to volunteer for a tax bill.

   Still, the taxes aren’t a massive punishment because the positions are so small.

   No one likes paying taxes but holding a position you’ve stopped believing in – that you’re not willing to add to so that it meets your minimum – is dumb. Moreover, if the stock or fund falters, you lose there too. Don’t let the tax tail wag the dog.

    What about my asset allocation?

   Because this is less an overhaul than a minor clean-up, chances are your asset-allocation isn’t massively altered by the changes.


   That said, be aware of where and how you want your portfolio positioned and compare that to where you will be as you close out small, outdated, and faithless positions.

   What will I do with the proceeds from any sales?

   This is where you can put your asset allocation back on track, but it also can help you decide what to keep.

   Rick, for example, has a few stocks he might want to hang onto, but that are currently below his minimum; he can beef those positions up using proceeds from any small sales he makes, thereby bolstering his winners.

   Have an idea of what you want to do with the money and it will help motivate you to carry the process through to the end, completing your portfolio clean-up and making your personal money-management process easier in the future.