Strategize: Trim an Overgrown Portfolio

Physician's Money Digest, July31 2003, Volume 10, Issue 14

Dr. David Moehring, a Washingtonstate orthopedic surgeon, is like manyof his fellow doctors who have watchedtheir investments plummet in the bearmarket. Once valued at nearly $1.4 million,the doctor's portfolio is reportedlynow down to about $600,000.

Wall Street Journal

With stocks and mutual funds in 7 differentretirement accounts (such as anIRA, 403(b), 457, and Keogh), he haswatched some investments fall drastically—like his Sirna Therapeutics stock andhis Munder mutual fund, which dropped45% last year, 49% 2 years ago, and 55%3 years ago. Approaching retirement age,he told a reporter thathe'll be working a few more years than heoriginally planned.

His wife, who has her own portfolio of50 stocks, has watched her own investmentsfall to approximately $80,000. InMarch 2000, they were worth $180,000.


Street Journal

Unlike his fellow physicians, though, Dr.Moehring had a unique opportunity tohave his family's portfolios reviewed by apanel of 3 experts. Profiled by the in its "Can This Portfolio BeSaved?," Dr. Moehring received the adviceof Rande Spiegelman, vice president offinancial planning at Charles Schwab & Co;Linda Lubitz, a certified financial planner™practitioner in Miami, Fla; and MitchellKurtz, senior vice president of Advest inGarden City, NY. Here is a summary of theiradvice as reported in the newspaper:

• Decrease the amount ofstocks—Spiegelman and Kurtz both feel30% of assets should be in bonds and 10%in money market/cash; Lubitz says 80%stocks and 20% bonds. As for the stocks,Spiegelman feels they should be divided30% large cap, 15% small and mid cap,and 15% international; Kurtz feels 40%large cap and 20% small and mid cap; andLubitz feels 45% large cap, 15% small andmid cap, and 20% international. They allthink the Moehrings have too muchinvested in risky tech and biotech sectorsand that international investments aretoo focused on Asia and Japan.

• Kill the losers—The advisorsseemed to feel it was a good idea tounload some stocks. Stocks to drop included:Applied Materials, Immucor, Corning,Blue Rhino, and Palm. Stocks to keepincluded: Ariba, Cisco Systems, Invitrogen,Intuit, Visx, PepsiCo, Klamath First Bancorp,Amgen, Walt Disney, Home Depot,General Electric, and Pfizer.

• Buy better stock bets—Spiegelmansays to trade some stocks for bettercompanies in the same industries. ReplaceRobert Mondavi with Church & Dwight orProctor & Gamble; and replace Cima Labswith Bausch & Lomb. Kurtz says to pick upKimberly-Clark, Adobe Systems, Walgreen,Bank of America, and DominionResources. Lubitz recommends lookinginto exchange-traded funds, which tradelike stocks but offer less risk and generallytrack an index or sector.

• Own the best funds—While Mrs.Moehring can buy and sell as she pleases,Dr. Moehring's retirement plans havevery restricted flexibility. As a result,Spiegelman says to "own the best funds ineach plan" and compensate for limitationsby using the more flexible IRA orKeogh. He recommends funds like ArtisanInternational, Oakmark International,American Century Equity Growth, JanusGrowth & Income, and Loomis SaylesSmall Cap Growth. He also likes theLehman Brothers Aggregate Bond Index.Lubitz likes the Pimco Real Return bondfund. She says Dr. Moehring should dropB-class shares of various Munder and Aimfunds and his Fidelity Japan. Instead buyCalamos Growth & Income, Dodge & CoxStock, Bjurman Micro-Cap Growth andAmerican Funds Europacific Growth orDreyfus Premier Emerging Markets Rshares, respectively. Finally, Kurtz likes theEaton Vance Government Obligationsbond and the ING Principal Protection VIIfund.