• Home
  • Join ETFguide
  • Insights
  • Tools
    • Margin of Safety
    • Investment Policy Statement
    • Portfolio Report Card
  • Login
  • Home
  • Join ETFguide
  • Insights
  • Tools
    • Margin of Safety
    • Investment Policy Statement
    • Portfolio Report Card
  • Login

4 Symptoms of an Unhealthy Investment Portfolio

  • Ronald Delegge
  • December 8, 2014

If you own a portfolio of investments, this article is for you. It doesn’t matter if you’re new at investing or a veteran with years of experience.  It also doesn’t matter whether you have a tax deferred retirement plan like an individual retirement account (IRA), a 401(k) plan, or a taxable portfolio. There are certain attributes that distinguish an unhealthy investment portfolio from one that is architecturally sound. What are they? Let’s analyze four symptoms.

Elevated and Opaque Costs
Investment studies have shown a high correlation between consistent market underperformance and high fee mutual funds. Moreover, other costs like brokerage trading commissions can erode returns. Finally, opaque fee arrangements with financial advisors or fund managers that make it difficult to assess the cost of investment advice are a telltale warning sign of an unhealthy portfolio.

(Audio) Listen to Ron DeLegge @ The Index Investing Show

Excessive Risk Taking
Whether it means over-concentrating money in one security or relying on leverage, unhealthy investment portfolios have a common shortcoming; they take risks that are abnormal and unnecessary.

Although some people – especially experienced investors – may feel comfortable with taking more investment risk, it doesn’t mean they should or that there won’t be adverse consequences.

Being Devoured by Taxes
Unhealthy investment portfolios are not built to deliberately minimize the negative impact of taxes. Whether that means owning tax unfriendly investment products, engaging in poor asset location, or having ill-timed asset sales, unhealthy portfolios invariably expose their owners to unwanted tax liabilities.

Market Underperformance
Despite a favorable stock (NYSEARCA:SCHB) and bond market (NYSEARCA:AGG) climate over the past several years, many investment portfolios that I’ve analyzed and graded, are still lagging behind key market indexes and the ETFs tracking them. It’s disappointing to see so many Portfolio Report Cards with unsatisfactory grades. What’s wrong? Performance problems point to major portfolio design flaws.

Summary
Contrary to what the public has been brainwashed to believe, a healthy portfolio isn’t necessarily the investment account that owns the hottest stocks or funds.

In the end, recognizing and avoiding the attributes of an unhealthy portfolio can mean the difference between investment failure and success. I hope you succeed.

Follow us on Twitter @ ETFguide

Subscribe To Our Newsletter

Get updates and learn from the best

PrevPreviousDid You Miss This Year’s Biggest Investment Themes? Here’s Four
NextAre Momentum Stocks Losing their Momentum?Next

More To Explore

Beyond the Index: How Small Cap and REIT Investing is Advancing for ETF Investors

In this episode of Spotlight, Thalia Hayden @etfguide chats with Paul Baiocchi, CFA & Chief ETF Strategist at SS&C ALPS Advisors. Topics covered include ETF

February 14, 2025

ETF Battles: A Mag 7 Big Tech Growth Stock Duel with TECL vs. FNGU vs. MAGX!

In this Season 6 episode of ETF Battles, Ron DeLegge @etfguide referees an audience requested ETF contest between Mag 7 growth stock and big technology

February 13, 2025

Do You Want To Boost Your Business?

drop us a line and keep in touch

Contact Us
© Copyright 2025 ETFGuide.com. All Rights Reserved.
  • About Us
  • Contact Us
  • Terms
  • Privacy
  • About Us
  • Contact Us
  • Terms
  • Privacy
Twitter Youtube
We use cookies to ensure that we give you the best experience on our website. By continuing to browse the site, you agree to our use of cookies.Ok