I said this out loud to myself earlier this week: “What is this crap?” I’d been flipping through my stock watchlist in Robinhood (our taxable brokerage account). I had 48 names of stocks (as well as funds) that I’d added at some point over the last 6 to 12 months. Time for a clean up.

Briefly flipping through the items, I didn’t even remember some of the names based on the ticker symbols. I looked up a few. But even then, I couldn’t remember for the life of me why I added the majority of them to the list.

With this in mind, I decided to do a little summer cleaning. Related, we just spent $175 to have our 1200 square foot 2 bedroom, 2 bath apartment thoroughly and professionally cleaned for the first time in 3 years. We still keep the place in good shape, but I recommend a good deep cleaning!

Now back to the Balanced Dividends watchlist clean up.

Background of the Clean Up

For the purpose of this exercise, “crap” is meant to be synonymous with items, belongings, or objects. In this instance, stocks or funds on the watchlist.

To be clear, even in my initial outburst, which at least our dog, Stella, heard, “crap” is not meant to be demeaning or imply something is literally crap. I’ll kindly defer to each reader to make his or her own respective determination if a name mentioned here is crap (however one might define it). But remember:

One person’s current crap is another person’s potential future crap.

I encourage you to always keep this in mind.

Ground Rules

To give each of the 48 items a fair chance, I performed the following actions to at least attempt to refresh my memory.

1. Ticker Symbol Review

As I didn’t even recognize some of the ticker symbols, I wanted to see if anything sparked a neuron when I at least saw the name. If I didn’t know the name, I flagged the item for likely removal from the watchlist.

2. Item Grouping Review

Items on the watchlist by default get sorted in the order they were added (Robinhood lets you arrange them in any order you’d like, but I didn’t move them).

There is no date or timestamp, but I noticed potential patterns. I added small groups of items to the list around the same time period. Perhaps I read an article. Or got an idea from another site.

If I still didn’t know the reason or background for considering the item, I flagged it for removal from the watchlist.

3. Quick Fundamentals Review

If an item made it from the first two preliminary sanity checks, I took a peek at some basic fundamentals (among others):

• (A) Distribution Frequency
• (B) Account Allocation Consideration
• (C) Price
• (D) Value

The above is some of our core criteria we utilized in our series of AT&T (T) purchases and our recent initial AbbVie (ABBV) purchases. Related to item B above, we hold both of these names in our taxable brokerage account.

Overall Strategy Gut Check

Following the above screening, any items left remained on the watchlist. However, I did consider removing additional items if they just felt like clutter.

If I couldn’t really see us considering and holding a name at some point for the long-term future, the item got removed.

The List of 48

With the rules and background now provided, here is the list of the watchlist names before the clean up.

Exercise Recap

I’m kind of impressed with myself (not really). I recognized the majority of the names, if not the ticker symbols, from the watchlist. Now, if you asked my WHY I had been watching these names, let’s just say I didn’t score as high in that round of questioning.

Here is a quick summary of the results.

Ticker Symbols

• 25 recognized, or 52.08% of all items
• 23 NOT recognized, or 47.92% of all items

Names

• 40 recognized, or 83.33% of all items
• 8 NOT recognized, or 16.67% of all items

High-Level Security Type

• 39 single names, or 81.25% of all items
• 6 exchange-traded funds (ETFs), or 12.50% of all items
• 3 closed-end funds (CEFs), or 6.25% of all items

Detailed Results

To get a more robust analysis and perspective, I also ran the holdings through the free Morningstar Instant XRay tool on the TD Ameritrade website. I simply assumed a one dollar ($1.00) allocation to each of the 48 items on the watchlist.

I used the simple bulk upload template on the website (a csv file with two fields only). Here is the outcome.

Asset Allocation

The percentage of now non-US stocks surprised me a bit. Certainly not a majority, the non-US stocks still commanded a respectful weighting. As of our June 2018 update, only ~13% of our current holdings are allocated to non-US stocks.

But I do believe a number of US – as well as other countries – companies get some type of benefit from diversification just by where they do business.

On bonds, the relatively small percentage came primarily via the CEFs.

Regions

Not too much to say hereafter reviewing the percentage of US stocks vs. non-US stocks. However, it’s worth noting the ~13% of Greater Asia exposure came from a few quasi start-up / post-IPO names I followed from the “Top 100 Names” based in popularity among Robinhood users.

Sectors

Overall, a good balance of industries, but still tilted toward income-producing, dividend-paying companies. Utilities, in particular, stuck out.

I’ve gotten non-electrifying results before after throwing +$100,000 into a utitliies fund. Nothing wrong with the sector – I just didn’t diversify.

The other item worth calling out is Real Estate, which seems quite low here for me. This is because of our already ~25% net worth allocation to Fundrise and a passively managed real estate index fund.

Other Asset Details

As income is a primary focus for us right now, the list of names leaned toward value names. No surprise here – especially the heavy emphasis on larger market cap names.

Post-Review Observations

Here are a few random things I found interesting about this exercise. I hope you obtained something useful as well that you can use for your own respective purposes.

Fund Names > Individual Names For Context

Fund or ETFs names are fairly straightforward. If you have a basic understanding of security types and terminology, you can more or less determine what type of assets are within the ETF (value vs. growth, geography or region, market cap, etc.).

Single names might be obvious if a behemoth or a hot name, but the industry or business might be more difficult to discern just by the name.

Beyond the naming convention, funds play an important part in our portfolio – despite our recent focus on single names. I still haven’t owned a CEF though.

“Hot” Ideas Can (But Shouldn’t) Drive Behavior

I think I added some of these names just based on what had been popular or in the spotlight. GE, as an example, had been in the news so much, so I added it to my watchlist.

Or some of the recent post-IPO names had a strong run over a 3-week period in June; I recall adding some of those more recently.

It’s important to ask yourself, “why am I considering this security?” “How does this fit into my overall strategy or investment objectives?”

In Addition To WHY, Actually Know WHAT You Might Be Buying

Overall, I’m comfortable with general asset classes and basic types of portfolios or paper assets. And I believe I have a basic acumen of many of the financial instruments that I utilize.

Despite that, I need to do much better at evaluating individual businesses and the fundamentals of a particular company, industry, and region. This is part of the reason why I find funds so appealing (and also why they’ll likely continue to form the bulk of our net worth).

Whether funds or individual names, it’s so important to understand what you’re buying – or even just considering.

Action Plan

After conducting your own Risk Control Self-Assessment (RCSA), it’s time to consider an action plan (if applicable). I definitely had one. I needed to clean up some crap.

Here is a summary of what was left after the exercise on the watchlist:

• 12 remained, or 25% of all items
• 36 items removed, or 75% of all items

While this is a very clean split, I didn’t have a particular number in mind. Surprisingly, a number of the names I removed I’d still consider at some point in the future. But they don’t meet our investment objectives for our taxable account at this time.

A couple of highlights:

• I removed all the LPs and CEFs
• ETFs got moved to an “archive” list for future reference.

Furthermore, a number of our holdings across our overall portfolio already contain some of the names that had been on our original watchlist pre-cleanup. This helped narrow down the pack the rest of the way.

Looking Back And – More Importantly – Ahead

As far as which final names remained on the watchlist, we’ll perhaps cover that in a future post. It’s key to realize that the watchlist – any list for that matter – should be dynamic.

Guidelines and rules are helpful, but you need to at least consider some type of flexibility or moderation. Balance is key.

Readers, have you ever performed a clean up of not only your portfolio but a watchlist? How do you consider what gets added to or removed from your lists? Do you have any recommendations for consideration?

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Related:

How We Got to Averaging $1,000 a Month in Passive Income

5 Ways to Balance Account Types To Balance Life’s (Un)known Milestones

Balanced Dividends (Semi-) Automatic Ecosystem

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