The first serious question I ask new or potential clients is “Do you know what you own and why you own it?” Most people are surprised by my question; unfortunately, hardly anyone is able to answer it accurately. As a Financial Advisor, I am referring specifically to the actual positions in your investment portfolios. What specific investments do you own? Do you have individual bonuses or bonus pools? Individual stocks or shares in mutual funds, ETF’s, UIT’s or closed-end funds? How are these assets allocated proportionally? Just as important, if not more, do you know why you own them? Did your previous adviser do a decent job of explaining their rationale?

But it is important to go back to the beginning. I mean, the beginning of your adult life. Even before I had values. It has been said that you can judge a person’s heart by looking at their check register. Looking at a large percentage of money flowing to charitable organizations, one can sense a merciful soul wanting to help those less fortunate. If, on the other hand, each check is made for things that uplift the check writer, a different impression of her heart might be formed. Look around. It is likely to reveal your preferences for where you put your money, as well as clues to your personality. Let’s face it: each and every thing you own is material. It is a possession. Unless it was given to you as a gift, it required you to part with your own money to acquire it.

So let’s take an honest inventory:

• Is your house well furnished and decorated? Is it aesthetically pleasing to you? Do you give high priority to the design and decoration of your home? I confess to being in this category; Having every room in my house well furnished is important to me. We frequently host guests and I enjoy knowing that I can practice hospitality at any time, that we have beautifully appointed beds for family and guests, comfortable surroundings for our children and their friends, and a well-stocked pantry for the teens who regularly drop in. and help themselves to our groceries. If this resonates with you, chances are you spend more money on home renovations, furniture, fabrics, appliances, fixtures, and accessories than your minimalist friends. Your investment portfolio probably contains other tangible assets, such as art and antiques. Perhaps you prefer to own art because you understand art. You follow that market and you have confidence to put your money there. These tangible assets are just as significant to you as the intangibles in a portfolio of stocks and bonds. When you consider what you own and why you own it, take an inventory of these assets and assign them a dollar value; They will be an important item on your personal balance sheet.

• Is your house your only real asset? Have you disproportionately aligned all your money toward this asset class? Do you own real estate because you feel more comfortable owning it? Do you intend to complete your portfolio in a few years by adding intangible assets? Is it wholly owned by you or jointly owned by the bank? Is your mortgage an amount that stays in your comfort zone? Remember that with all asset classes, tangible or intangible, cycles play a role. Your real estate asset will go up and down as the markets change. The real estate slump of the past few years has caused even die-hard realtors to lose conviction and diversify into other asset classes.

• Is your biggest asset in your garage? Do you have a fondness for luxury cars? Did you pay cash or are you making payments? Do you rent your cars? Do you know the resale value? Are you driving a luxury car at the expense of meeting your family’s most immediate needs or meeting your future needs? If you own a luxury car, you should add it to your portfolio as a true hard asset, as long as a non-interested party can assign a dollar value to it.

• Do you prefer other tangible assets? Jewelry, gold, art, sports memorabilia, wine, stamps, and antiques all have a place in the overall investment portfolio. Is the percentage you have allocated to these fixed assets appropriate, given your projected revenue and budget constraints? Are you a serious collector? Do you collect to satisfy a deep-seated emotional need, or do you do so with the bottom line in mind? Do you intend to pass on your valuable collection to your heirs, to a museum or to a foundation?

• Would you rather invest in experiences? Would you rather spend your money on food and go out to dinner? Do you have season theater tickets? Or sporting events? Do you count “world traveler” among your titles? At the end of your life, would you rather die having seen the world, celebrated the joys of life with those you love most, or have an accumulation of valuable possessions?

Once you’ve accurately assessed the assets that are visible in your everyday environment, take a moment for introspection. Behavioral finance is a real area of ​​study in economic theory. We all make purchasing decisions based on our gender, personality type, emotional needs, psychology, and cultural context. There is no judgment here from financial professionals, or at least there shouldn’t be. We all own things. And we need to understand why we own what we do before we can look at the intangible assets in our lives.

Now let’s turn our attention to your portfolio of intangibles, that is, your portfolio of stocks and bonds. In the name of “financial literacy for all,” it’s critical that you understand your portfolio. There is not enough space in this article to delve into portfolio theory; however, you can start by simply opening your monthly investment statement and spending a few hours with a pad and pen, or on your computer.

First: look at the breakdown of your holdings. Most investment firms divide their assets into fixed income and equity holdings. Write down the percentages that you have in each category. Then write down the individual positions. If you have an excessive number of individual equity positions, ask yourself or your adviser if you are overdiversified. Conversely, if you own individual positions and own fewer than a dozen, you’ll want to consider increasing the diversity in your portfolio to minimize risk. This is one of the most basic starting points for understanding what you own and why you own it; however, few investors take the time to take this simple but necessary first step.

Next: Draw a simple pie chart. Divide your pie according to how much you own in each category. Search specifically for large-cap, mid-cap, small-cap, international and emerging markets stocks; fixed income shares; Alternative Investments and Cash. Assign percentages to each part of your “pie.” Do these percentages make sense to you, given your general understanding of the markets, your investing time horizon, and your tolerance for risk? If you can effectively visualize your intangible possessions, these possessions you can’t touch or see, in the form of a pie chart, or by arranging them in columns, by connecting them to your iPhone, or by putting them in an Excel spreadsheet, then by all means do it. . Most people are highly visual, and I’ve found that my clients are better able to control their portfolios if they can translate the intangible into the tangible in whatever form is most comfortable or familiar to them.

Once your holdings are presented visually, look at the historical performance of your holdings. Remember the analogy that one should never look in the rear view mirror while driving to determine the best way to get to their destination. However, we use history as a guide to performance and it should be used as a data point to judge whether the holding should remain in your portfolio.

After you’ve spent some time carefully and thoroughly analyzing your possessions, both tangible and intangible, you’ll know for sure what you own and why you own it. And it’s not just that you’ll have a better understanding of where exactly you fit into the larger universe of investing. You will be empowered and equipped to make smart decisions in the future.