Now is the Best Time to Review your Investment Portfolio


Tax time is an excellent time for investors to evaluate their investments, to determine whether their investments have been appropriately handled, and to reevaluate their investment objectives and risk tolerance. Taxpayers or their accountants have assembled and are reviewing (or have already reviewed) a number of financial documents in preparation for the filing of income tax returns. Investors should carefully review the status of their investments and their asset allocation to determine whether these items are in accordance with their objectives and status in life.

Accountants are in a particularly good position to also review an investor’s accounts and provide an investor with some guidance. Accountants can often spot warning signs, or “red flags,” that may point to mismanagement of their clients’ securities or brokerage accounts. Existence of one or more of these warning signs does not always mean actual mismanagement, but further inquiry is strongly recommended.

  1. The portfolio is concentrated in financial or mortgage related securities or other “hot” sectors.
  2. The portfolio contains auction rate securities or structured finance products, such as collateralized debt obligations.
  3. The account contains securities that have been “in the news” as significantly underperforming relative to their peers or benchmark, such as Morgan Keegan Bond Funds (down over 80%), or the Schwab YieldPlus Fund, a purportedly ultra short-term bond fund that is down over 30%).
  4. The account has significantly underperformed a benchmark that is reflective of the investor’s investment objective and risk tolerance, such as the Vanguard Total Bond Market Index or the Vanguard Balanced Index.
  5. The account statement contains risky investments, such as volatile stocks or bonds, derivatives (options, futures, foreign currency), microcap stocks (small companies with unfamiliar names), and bulletin board stocks (not listed on major stock exchanges), or mutual funds that invested in such securities.
  6. The investor’s accounts are not well diversified and/or do not employ reasonable asset allocation strategies (spreading investments among stocks, bonds, mutual funds and other asset categories).
  7. If any of these warning signs exist, the investor may have been exposed to substantially greater risk and sustained substantially greater losses than market conditions warranted.

    Brokers have legal duties to fully disclose all material facts and risks regarding investments and not to recommend an investment or strategy that is unsuitable for a client based on the client’s investment objective and risk tolerance. When these and other red flags are spotted, further evaluation will often reveal that legal duties were breached. Investors who believe they may have been a victim of such breaches are encouraged to consult attorneys with expertise in the matter to discuss their case and options.

    Page Perry is an Atlanta-based law firm with over 125 years collective experience representing investors in securities-related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions, and have aided clients who have been the victims of financial adviser abuse, unsuitable recommendations, and scams. Page Perry’s attorneys are actively involved in counseling institutional and individual investors regarding their investment problems. For further information, please contact us.