2007: The Year in Review

Year-end is always a good time to reflect on the previous years' investing experience and separate what worked well and what could use additional optimization. Overall, 2007 was not a banner year for a lot of investors, myself included. The sub-prime melt-down caused a lot of pain in my portfolio. Going into the year I was over-exposed to the real estate and financial sectors. I owned several mortgage companies of which a few were sub-prime. Needless to say that portion of my portfolio took a beating.

As noted in my The Process... post, my taxable portfolio is targeted to be equally-weighted between Mutual Funds, ETFs and my Dividend Stocks. I have not quite achieved that weighting. Currently, my weightings are as follows:

• 52% Mutual Funds
• 15% ETFs
• 33% Income Stocks

ETFs are my newest investment vehicle, that is why their allocation is lagging, while Mutual Funds is by far the oldest, hence their over-weighting. My approach to correcting this imbalance is through new investment. I don't want to correct the imbalance by selling Mutual Funds and generating taxes on capital gains, thus reducing the total amount available for investment. Given the dollar magnitude of the imbalance, it may not be fully corrected in 2008.

The Good: My allocation helped to preserve a significant portion of my investment portfolio.

Needs Improvement: I need to, and will, pay more attention to my diversification and asset allocation within my Income Stocks. For 2008, I plan to optimize my Income Stock/ETF portfolio, by reducing my exposure to real estate (36%) and banking (16%) through new investments in 2008.

How did your portfolio perform in 2007 and what changes are you contemplating in 2008?


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