Investors in the stock market have enjoyed strong performance, for the most part, since the lows of 2009 — the S&P 500® index, for example, has risen in excess of 225%. And in addition to strong returns, we have seen little of the volatility that typically scares investors out of the market. A key volatility measure — the VIX Index — continues to trade below its long-term average and well below its “Great Recession” levels.
That’s great news, sure, but there’s a down side. Your portfolio might well have become over allocated to stocks and over-exposed to a downturn. Here’s why:
Growth – Your stocks and stock-based funds have grown at a faster pace over the past eight years and, if you haven’t made any changes, likely represent a bigger percentage of your portfolio than before. If you started out at your target percentage of equities in your portfolio and haven’t rebalanced, it’s our guess that you’ve got a much higher percentage now.
Age – Sorry to be the ones to say it, but you’re almost a decade older now, and that means you’re closer to retirement. If you are investing on a long-term strategy of systematically decreasing your equity holdings as you age, then the rally likely has you even further from your target allocation.
What’s the take-way? The time to reduce your equity holdings to your target allocation is before a correction.
At Duncan Williams Asset Management, we love to help investors nearing retirement prepare their portfolios for the years ahead. Give us a call – we’d love to answer any questions you have about your exposure to future volatility.
Ready to take action?
Let's talk about your financial future.
A local Memphis advisor is ready to listen. No pressure, no obligation.