“Marie Kondo” Your Portfolio
In 2018, a young girl started a movement. In less than 6 months, she was on Netflix and even set up her own academy to teach others to be her consultants.
Her name is Marie Kondo. And her movement is simple.
Clean up and organise your house.
Her methods are so effective that it is now used as a verb.
“I will marie kondo my place”
How is this related to investing?
Whenever I do a portfolio review with my students, I will always brace myself first.
Sometimes, I will see portfolio with more than 50 stocks!
Once, there was a student who sheepishly showed me his portfolio and pre-warned me not to scold him.
Joking, I replied, “How bad can it be?”
He shared his screen with me and I saw more than 200 stocks! I almost screamed at him.
Therefore, as the market enters a correction this week, it is a good time to “marie kondo” your portfolio.
Why Now?
Frankly, anytime is a good time to review your portfolio. Especially during a down-market, because in a down market is when good stocks are selling at a cheap price.
What do you mean?
In your portfolio, there may be some poor investments or bad decisions made in the past.
Firstly, don’t beat yourself over it. What is done is done.
The important thing is that you can still correct the mistakes!
When you review your portfolio, it will very often involve selling away some holdings. Selling means raising CASH!
These cash can be reallocated to better use now!
And what better time to reallocate them during a down market when good companies are selling at a discount?
How do you decide what are poor investments or bad decisions?
This can be subjective because one person’s trash can be another person’s treasure.
One key metric I used is a Question.
“Do I see this business becoming bigger and more profitable in the next 5-10years?”
If the answer is Yes, I keep them.
If the answer is No, I sell them and look for better opportunities
Ideally, you want to have a portfolio of only strong business that you understand!
Sidenote
Recently, I had a taste of Marie Kondo when I was moving to a new place.
During the process, I had the opportunity to not just organise my new house but also to throw away my older belongings.
While Marie Kondo will ask, “Does it spark joy?”
Pete asked, “Have I used it at least once in the last 3 years?”
My method is simple too. If I haven’t had the need to use it at least once in the last 3 years (which is more than 1000 days), I probably don’t need it.
I conclude that I am better at cleaning up my portfolio than my house 🙂
