Spring-clean your portfolio with a gentle touch – Absa

Retail investors who have not yet ‘spring-cleaned’ their portfolios should not feel under any obligation to do so. They could take a year off or make only slight adjustments.

The advice comes from Craig Pheiffer, General Manager, Investments, at Absa Asset Management Private Clients.

“Those who get the urge to make big portfolio changes at this time of year should think things through carefully this time around,” he says.

“At the moment, there is a good case for sitting tight. If your portfolio was closely aligned with your strategic investment objects a few months ago, then there should be no reason to change.

“The danger after JSE equity losses in the third quarter is that nervous investors will run down their equity positions and realise losses when sitting tight might have led to gains.”

However, one type of investor might benefit from sprucing up the asset allocations in time for summer – the profit-taker who moved out of equities some time ago and has been sitting on the JSE sidelines (and a pile of cash) ever since.

“The nervous investor who long ago moved into cash and bonds has done relatively well of late,” says Pheiffer. “But this category of investor could run some lost opportunity risks if they stay in cash for an extended period.”

The JSE All Bond Index moved 2.81% higher in the September quarter for a 5.13% gain for the year to date while cash was up 1.40% for the quarter on the Steffi Composite Index of cash and cash equivalents. The gain for the year so far is 4.28%.

In contrast, the All Share Index fell by 5.84% for the third quarter and 5.36% year to date.

Pheiffer believes an asset sell-off by troubled European banks and concerns about US growth triggered the market slide and caused many retail investors to lose sight of more positive indicators.

“Global growth projections still hover around 3.6% for 2011, with 3.7% next year,” he notes. “Equity P/E ratios, offshore and on, look attractive in the x12 range while many companies are positioned for a better second half in 2011, with 2012 prospects brighter still.

“This suggests value can be found; perhaps in resource counters or other selected equities.

“Investors who are underweight in equities might therefore decide to rearrange the asset allocation ‘furniture’ by bringing equities to the fore. But if you don’t fall into this category of cash-flush investors, you might like to skip the spring cleaning this year.”