The Dinosaur Investments in your Portfolio that you may want to Revisit and Why

Market ups and downs are always going to be part of our lives. Many investors use a “buy and hold” strategy in their Portfolio, a compelling long-term investment method. What may end up happening is the lack of change in the investments may cause some unintended consequences. In no particular order, they may include:

1. Risk exposure in the Portfolio may be more extensive than when you started. Stocks just ended the longest bull market in history. You may have started with a 50/50 stock to bonds ratio now 65 to 70% stock.

2. The mutual funds or stocks that you have chosen could be out of style or not appropriately managed.

3. If your investments are in an account that is taxable every year, you may be losing out to tax inefficiencies that may be easy to correct.

4. Overall, Market Movements may derail your methodology.

5. Losing focus on your long term goals as it relates to your approach.

Risk Exposure is one of the critical elements for the success of any portfolio. In general, as we age, we may lower the amount of stock that we have in investments. If you do not regularly adjust your ratio of stocks to more conservative options, it may have a detrimental impact on your long-term goals. You may end up making emotional decisions at the wrong time, such as last year’s market low. There are two things that you can do immediately to help guard against this happening.

1. Work with a professional that uses specific risk measuring tools. There are several options, and anything is better than just guessing.

2. Have a second opinion on your strategy so that you see what potential changes may be needed.

Investment style means what types of stocks and other financial instruments do I own. In the recent market downturn, one of the hardest-hit areas was Value stocks. Unfortunately, companies like Exxon Mobil and Delta saw a 60% loss in a short period. It may be years for them to recover. By moving to Growth or Blended stocks, your Portfolio will be less exposed to the vulnerable sectors. While this may sound easy to implement on its face, it is not and takes discipline and strategy to implement.

Tax inefficiencies are also a common issue that may need addressing. There may be a huge benefit to selling stocks or mutual funds you may have owned for a long time. Using “Tax-Loss Harvesting” may be vital to keeping your Portfolio balanced and helping to offset capital gains. When you have market volatility and potentially some losses that may help offset gains, it may be a great time to look into this method. You may be able to deduct your loss and boost your future returns.

Large Market Movements are one of the most challenging times to stay disciplined and aligned with your values. Experiencing loss is one of the most emotional times a person can go through. We all have second thoughts about whether or not we made the right decisions. It is imperative to try and focus on the long term. If you change your portfolio midstream during turbulent times, you may end up in one of the classic “buy high, sell low” situations. Having someone to counsel you during periods of storminess is potentially a game-changer if you feel incredibly exposed. Many investors have sailed through unsettled stretches in the market. However, it is incredibly tricky if you have recently been laid off or were looking to retire. A detailed financial plan must be part of your strategy for future financial success.

Long Term Goals are critical, and you must have all of the different elements of your Portfolio working toward a common objective. Items such as making your Portfolio more tax-efficient, lowering or increasing risk, or recognizing holes in your game plan are essential. Not focusing on one area can potentially be the difference between success and failure. Cash flow is one of the items we find is the most complicated part of a person’s strategy. In terms of longer-range planning, it means you have to decide which pot of money to pull your income. Do you use your IRA or a taxable account first or a little bit of both? Do you sell a stock you own a lot of shares? Finding the right balance may be one of the most important decisions you make. It is not always about performance or having the latest and most investment. Most of the time, it comes down to proper planning and simplicity.


Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk, including loss of principal.

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