What if everything we've been taught about asset allocation is all wrong? No more questions about how much risk you can tolerate, how you coped in 2008, or putting more and more of your portfolio into bonds as your age. What if instead, you divvied up your assets based solely on the goals you want to achieve, and the time you have to achieve them? Let's look at an example.
Financial advisors are numbers people. That's especially true at Abacus, where we take an analytical approach to each client's financial situation, looking at it from all possible angles and evaluating different scenarios.
Recently, a client sent me a note, which I paraphrase: "The stock market is high and we are facing a possible government shutdown. It would be prudent to sell some stock and stay in more cash, say 25% or 30% of the portfolio for a while, and then come back in after things tank. It does look like a tsunami is headed our way."
I would like to share my response in case it would be relevant to others.
The Abacus Investment Committee ("IC") reexamined the firm's model portfolio fixed-income allocation in Q2 and has decided to reduce the TIPS (Treasury Inflation-Protected Securities) portion of fixed income from 20% to 10%. The remaining 10% will be allocated to DFEQX (DFA Short-Term Extended Quality Fund).
It seems like almost every day someone asks me if the stock market is too high and therefore due for correction. Doesn't an all-time high for the S&P 500 mean it is more likely to go down than up from here, especially given that it has been at this level twice before, and both times, those highs were followed by two of the worst market declines since the Great Depression?
Hello and happy 2013 from the Abacus Investment Committee (IC). The IC certainly had a busy 2012. We revised our bond fund mix to capture better yields with only a modest increase in credit risk and interest rate risk; we added master limited partnerships (MLPs, which are energy infrastructure companies) to most client portfolios; we designed and launched our new “income portfolios,” which put more emphasis on generating income than capital gains; and we have made available to our accredited clients two new private investment options for which we conducted extensive due diligence and placed in portfolios where appropriate. Our IC is excited to be meeting in the next few weeks to discuss key themes for 2013 and set our priorities, initiatives and agenda for the next 12 months.