Active management is not about timing the market – it is about smart investing, diversification, and taking advantage of macro trends in the marketplace. Remember, time in the market always beats timing the market.
Keeping your portfolio tilted to any one asset class year after year makes it difficult for you to capitalize on emerging trends and dynamic markets.
One important idea behind active management is the idea of active rebalancing. For example, if your financial goals rely on a mix of 60% stocks and 40% bonds, over time, this balance can change as the markets fluctuate. Rebalancing is regularly resetting your portfolio to target allocations. While it’s important to rebalance at regular intervals, it’s also important to rebalance at times like these when market volatility is extreme. Not only does this provide some much-needed stability in your portfolio, but it also allows you to take advantage of opportunities as they arise. It’s also important from a tax standpoint. Some firms rebalance non-IRA accounts with no regard for the tax ramifications.
Even in challenging market conditions, there are always opportunities. For example, as reopening has gotten underway across the nation, we’re seeing a rotation away from Tech and into Value. Cyclical sectors like energy, financial, and industrials are leading the markets. Overweighting certain segments can help give your portfolio a competitive edge and set you up for long-term success.
Provided that you’ve chosen an independent company that serves as a fiduciary, as we do for our clients, you’ll have a trusted sounding board and experienced professionals to help steer you in the right direction. This steadying hand can help keep you from making mistakes or bad decisions as an emotional reaction to unexpected volatility.
Are all these things happening – rebalancing, reallocating, taking advantage of opportunities, and do you have the right tax strategies in place? This is all part of coordination. We view every client transaction through the lens of financial, tax, legal, and insurance planning. A mistake or improper planning in any of these areas can cause major issues in your long-term financial goals.
