There’s just one month left in 2019, and now’s the time to get your portfolios ready for 2020. Here’s a checklist of things you might want to consider. The list is meant to be general in nature, so be sure you’re on top of your own financial considerations.


We all know the saying about death and taxes, but it helps to be proactive when it comes to your taxes. One of our goals at TradeSmith is to help keep you in trades as long as possible, but we also realize that not every trade is going to be a winner. This is a good time to go over the current condition of each position in your account.

Here’s a look at a portfolio with a couple of stocks that have lost money this year.

portfolio of positions, showing gains without dividends

The losses in Macy’s (M) and Pfizer (PFE) could be used to offset some gains that you’re considering pulling off the table.

Of course, we are not tax advisors, and we don’t know your financial situation. The only one who can advise you properly is your personal CPA or tax consultant.

Asset Allocation

Over the course of a year, it’s easy for a portfolio with good diversification to become less diversified. That can happen through some stocks moving up in price and some moving down in price. Here’s the diversification for the above portfolio according to the TradeStops Asset Allocation tool.

Asset Allocation of sample portfolio

The diversification isn’t too bad, but almost 35% of the portfolio is in technology stocks while less than 5% of the portfolio is in health care and consumer discretionary stocks. Why is this important? If your portfolio is too heavily weighted in one sector or industry, it wouldn’t take much of a shock to that sector to negatively impact your portfolio.
Portfolio Volatility

While you’re checking the diversification in your portfolio, you might also want to check its current Portfolio Volatility Quotient (PVQ). The PVQ tool is available in the TradeStops suite of tools. It looks at the correlations between the stocks you own to determine the normal volatility of your portfolio.

PVQ of sample portfolio

In the case of our sample portfolio, the PVQ is 15.26%. For comparison purposes, the current Volatility Quotient (VQ) of the S&P 500 is 9.3%. This means the volatility of this portfolio is more than 50% higher than the S&P 500. That’s not necessarily bad, but it’s a number that you should know as an investor.

Risk Per Position

The last thing we’re going to look at today is the actual risk you’re taking in each position in your portfolio. We can get this number through the Risk Rebalancer tool. One of the most powerful tools that TradeStops brings to individual investors is the concept of taking an equal amount of risk per position. Now that we’re at the end of the year, this is a good time to see where your portfolio stands.

Risk Rebalancer of sample portfolio

You can see that we’re taking more than 4% of risk in just one stock (NFLX) and several stocks have less than 1% risk. The results from the Risk Rebalancer suggest that this portfolio would have risk parity if there was 1.35% of risk taken per position. By the way, if we were to rebalance this portfolio, the PVQ would drop substantially to under 12%.

PVQ of sample portfolio after balancing

With a month to go in 2019, we’re not saying that you have to make changes now. These are your portfolios that you’ve set up according to your personal goals, risk tolerance, and rules. But if you haven’t checked on your portfolios in a while, now would be a great time to know where you stand and then you can determine if you want to make any changes.

Marina and I will host a webinar on Wednesday, Dec. 11 at 1 P.M. ET to go over these ideas and answer questions you have about how to use the tools of TradeSmith to manage your portfolios for the end of 2019 and beginning of 2020. To register for the presentation, click here.


Tom Meyer
Research and Education Specialist, TradeSmith