Asset Allocation Review

As the stock market continues to reach all-time highs, we want to encourage you to review your investable assets to make sure your asset allocation is still appropriate based on your goals and risk tolerance.

You may be asking yourself what you can do in today’s environment. We have outlined a handful of important steps:

  1. Review your investment goals and objectives, time horizon, and tolerance for market volatility. One’s financial picture and priorities can change over the years. It is best to optimize your asset allocation accordingly.
  2. Stay diversified across multiple asset classes and securities. Diversification amongst uncorrelated asset classes can provide downside protection during market corrections.
  3.  Own quality assets. For example, we seek companies that have strong competitive advantages, strong balance sheets, and generate a lot of cash.
  4. Allocate to riskier assets only when you are being properly compensated to take on the additional risk.
  5. Temper return expectations going forward. Over the last decade, the US stock market’s average annual percentage return has been in the double-digits, significantly above its historical high-single-digit average annual return. This recent trend is not going to continue forever, and returns over the next decade are likely to be more modest. In fact, some large institutional investors are forecasting mid-single-digit returns over the next ten years.
  6. With the increasing probability of higher tax rates in future years, now is a good time to review your tax position and strategy.  Many of our clients are sitting on large, unrealized gains in their portfolio.  Developing a plan to minimize one’s tax burden going forward is always a good idea.

If you have questions on any of these above-mentioned steps and how they can be incorporated into your financial plan, please feel free to give us a call.

We take pride in working with our clients to help them achieve their financial goals, regardless of the macroeconomic environment.