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Managing a Portfolio - Questions you need to ask


Published: 06/12/2012


 How do you know if your advisor is adding value? Your advisor adds value if the performance of your investment portfolio matches or exceeds the performance of a passive ‘couch potato’ benchmark. Of course, it’s almost impossible to know if your advisor is adding value without a proper performance report – which you will have to ask for.


It goes without saying that your advisor likely is intelligent, caring and likeable.

No salesperson can succeed without these qualities. But if it has not been offered, you need to ask for performance information, because experience shows that few advisors add any value compared to the passive benchmark. Most mutual fund portfolios underperform by about 2% per annum and portfolios where the advisor recommends individual stocks usually fare worse. 


Fortunately, it is easy to determine if your advisor is adding value. You simply need to see a performance report, which shows performance against the proper composite benchmark. If your advisor is unable or unwilling to provide this information, you need a new advisor. However, you can always find it yourself by using the tools at and


Those who manage their own portfolio should be able to answer ‘yes’ to most of the following questions.

1.  Am I clear on my goals and do I know the rate of return required to achieve my goals?

2.  Do I have the correct asset mix given the rate of return required to achieve my goals?

3.  Am I focused on the investment process? (The investment process is more important than the investment products.)

4.  Do I have my own Investment Policy Statement (IPS) that sets out my investment strategy?

5.  Is my portfolio simple, easy to understand and easy to adjust when my IPS indicates that adjustments are required?

6.  Is my performance equal to a passive ‘couch potato’ portfolio with similar risk?

7.  Do I know how much the portfolio can be expected to fall in a bad market and am I comfortable with this downside potential, which is almost certain to happen sooner or later?

8.  Is my portfolio income-tax-efficient and am I using the appropriate tax planning strategies?

9.  Does my portfolio address other possibilities, e.g., a stock market crash, high inflation, rapid growth, currency fluctuations, and interest rate risk?

10. Is my portfolio at least 50% in passive securities (index funds or ETFs)


If you are unable to answer yes to most of these questions, you may be taking more risk than necessary and you might have better results by using a ‘couch potato’ ETF portfolio. The key to financial success is to take responsibility for your investment portfolio.


The financial services industry goes to great lengths to make investors think they don’t need to ask these questions. For most investors, failure to ask these questions means taking more risk than necessary and/or working years longer than necessary before they can afford to retire, or if retired, it means not being able to spend as much as you would like to spend, or to leave as much as you would like to your children.  


•   Warren MacKenzie, CA, CFP,  CIMA, is president of Weigh House Investor Services of Toronto. He can be reached at or 416-640-0550.



©ricardo reitmeyer – iStockphoto

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