Eileen's picks

Decision-making on our family trust

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On the first Saturday after the last trading day of the month, you'll find me at my desk in an office my husband and daughter painted to look like a rain forest, looking at two computers and a spreadsheet. That's when, for each account that makes up our family trust, I record money that's been added, what's been spent, the current value of each stock or fund, the current sector allocation of the portfolio and of the market as a whole. I also record the current ratings for each stock and fund we own and whether there have been any significant shifts in the portfolios of funds.

With all the data in place, I look at asset allocation by asset type. If an asset type -- US, foreign, "safe stuff" (meaning bonds, CDs and money market funds), real estate and commodities -- is over or under by less than 5%, and there are no major "red flags" about company or fund performance and no sector allocations that are substantially off, I'm done. Everything stays as it is, and I'm back to life.

If an asset type is over or under by more than 5%, I do some research to decide whether I think the situation is likely to be temporary or not. When a category other than "safe stuff" is over or under by 8%, it's time to reallocate. Period. I never fail to reallocate. Ever.

When reallocation is needed, I look at capitalization, growth/blend/value, and sector to find candidates to buy. Selling is easy: the biggest loser in the "over" category is sold down to the appropriate level unless it will disrupt some other allocation by more than 10%.

When I've found what I think are the right candidates for sale and purchase, I call the person who controls whatever portion of the trust the candidates happen to be in and explain my reasoning to that person. Assuming my mother, for example, agrees with me, she then makes the trades herself. I've found that having responsibility for making final decisions and actual trades spread around the family has increased a sense of ownership in the whole process, and it has certainly engaged the interest of everyone who's been willing to give it a try. Family members who never paid any attention to the stock market now find financial news riveting. An added bonus: I never have to worry that I -- or my successor -- will be accused of anything worse than poor research.