The volatility of the past several days provides an opportunity to work on your investment portfolio. Here are a few of the things I’ll be busy doing.
Allocation and Correlation
Portfolios vary in the complexity of their allocation. Some include a vast array of stocks and bonds and may not be closely correlated to indices like the Dow Jones Industrial Average or the S&P 500. The correlation of your holdings may be clearly seen when volatility increases.
So take a look. Did you experience a loss or gain in percentage points similar to the index you’re watching? Typically, we want an overall portfolio to move less.
This certainly holds true for investors with a lower risk tolerance or shorter time horizon. The keys to proper allocation, in my opinion, are a mix of uncorrelated assets that have the potential to grow at a fairly steady pace while not succumbing to pullbacks in a particular asset class.
Using pullbacks to acquire assets in the classes of your portfolio that should be increased is one of my highest priorities. How do you know what you need?
* Progress toward annual growth or income goal
* Comparison to pre-determined benchmark
* Changes in overall economic conditions
* Life events
Rather than worrying about the down days, take the opportunity to review and adjust. These can be busy times but The Linkous Group, Ltd. is here to help you work efficiently through it.
Until next week,
Susan R. Linkous
The above comments represent my opinion and investors should always seek advice before investing. Asset allocation is not a guarantee against loss, nothing is. Have a great week and reach out to me with any questions.