Following the post-COVID stimulus hangover in 2022, the bull market has continued to run. One of the key factors was the Federal Reserve’s decision to
How to Ensure Your Portfolio is Seaworthy in Stormy Markets
Published Date : October 28, 2015
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” – William A. Ward
Before setting out on a long journey at sea, you prepare your boat for the severe weather conditions you are likely to encounter. In the course of planning your trip, you will likely also research safe harbors for the most severe storms. The same preparation applies to building and maintaining an investment portfolio because – like the weather – future market conditions are limited in their predictability. Just as long periods of sailing calm seas can lead to underestimating the inevitable risks of ocean travel, the markets can also surprise us after long periods of relative quiet.
Over the last three years, the volatility of the US equity markets has remained at historic lows. The relatively smooth rise of the S&P 500 has pacified risk-weary investors. In August, however, equity markets were jolted by the first meaningful, though statistically normal, market correction in three years. It served as a reminder that it’s important to periodically review all of your invested assets together – consolidated as one single portfolio rather than separate and unrelated accounts – to ensure your asset allocation remains in-line with long-term risk tolerances and investment objectives.
While Sand Hill manages portfolios through rebalancing during market peaks and troughs, failing to trim over-sized or over-valued securities in accounts that are not professionally managed can unintentionally cause a portfolio to drift from a healthy allocation. The prevailing market dynamic of recent years, in which US large cap stocks have outpaced all other asset classes and specifically low-yielding fixed income investments, can lend a sense of complacency to those managing funds on their own. Rewarded with attractive returns, investors have eschewed rebalancing and, in part, the inherent underlying risks that are found in both equity investing and concentrations in a single asset class. Mentally “bucketing” and separating accounts from the whole can further unintentionally exacerbate the levels of risk incurred in a portfolio.
To protect against the risks involved in over-reliance on a single asset class, it is important to keep an eye on the asset mix in all your accounts, particularly those not subject to a rebalancing discipline. The task can be difficult if there are securities accounts scattered among various brokerage and retirement accounts. To improve efficiency and relieve complexity, you might consider consolidating accounts, optimally with a single custodian. Mandatory withdrawals from retirement accounts alone can be an administrative nightmare without reasonable consolidation. Most of all, being able to easily recognize and quantify risk will reduce anxiety when markets inevitably exhibit volatility. Take this time to review your total portfolio’s structure and have your Wealth Manager evaluate your “seaworthiness.”
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
Video Presentations
All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
Other Posts By This Author
- – The Indispensable Role of Professional Eldercare Management Services
- – SEP IRA or Individual 401(k)? A Question Worth Exploring for the Self-Employed
- – Donor-Advised Funds Considerations to Help Accomplish Your Philanthropic Goals
- – The Importance of Segregated Assets at Brokerage Firms
Related Posts
Recent Posts
