Too many times it's only when media outlets are reporting that the market has "crashed" that people want to make changes to their portfolio. This behavior - which puts emotions in front of logic - is the foundation of why investor portfolios lag behind advised portfolios.
At CAISSA, we take the opposite approach. As the Dow and the S&P 500 are hitting record highs, now is the time to make strategic changes. In good markets we assess the overall allocation and how it supports your financial planning goals. If we are getting a little "frothy" or overweight in one area because the market has been good to us, we take our winnings off the table to a more sensible level. We never leave an investment area entirely, we just pull back our exposure to it. We will take that money and lean into another area that may have been beaten up a bit.
As we read our economic data daily, we also take some of the money and put it to work in areas we think will win from strategies developing at the Federal Reserve and in reaction to government policies or international markets. Think about how you felt in the last quarter of 2018 when the market was down 20%. If that had persisted another 12 months, would you feel good about your investment portfolio? If the answer is no, then consider making changes today instead of waiting for the next dip. That's when you can sit tight and know you made strategic decisions when times were good.
Preparing for the next market dip
Even when the market is doing well, it's common to feel anxious about getting through the next market dip. That's one of the reasons why we structure our retirement financial planning the way we do.
Tranches of Income approach to retirement planning segments your future withdrawal needs into three "Tranches" or time frames. The first Tranche includes up to seven years of cash flow - enough to withstand the average downturn/recovery cycle with a few additional years for
equities to recoup returns.