Stay the Course
You hear us say it all the time: “Stay the course”. Even with headlines about trade wars, interest rates, impeachment, etc. we believe you should remain invested and continue to work with our team to ensure that your portfolio is suitable for your investment goals and risk tolerance.
We understand that increased volatility can be concerning, but it should not be interpreted as a sign to exit the market. If you compare the last ten years versus the ten years before that, we have actually experienced less volatile market conditions. Using the S&P 500 as an example, the average daily movement from June 2009 to present is approximately .20% versus .28% from June 1999 to May 2009.1
What does this tell us? It tells us that despite prominent headlines in today’s news cycle, market volatility is, historically, “normal”.
In times of potentially volatile markets, remaining invested with a properly allocated and actively rebalanced portfolio can help you continue to reach your financial goals. The total return investment philosophy that we have at Collins Investment Group aims to do just that. Through our active management, we are able to rebalance your portfolios as necessary, which will keep your portfolio in line with your investment goals and risk tolerance. It will also allow us to take advantage of undervalued sectors, and moderate exposure in the “hot” sectors. Whether you are in an income stage of your life, or a growth stage of your life, our goal is to help reduce your day-to-day stress through understanding your investments and generating returns that are more consistent over time.
One framework we use to help you understand your portfolio and gauge whether your investments are properly aligned with your investment objectives is an efficient frontier. The efficient frontier is a way to illustrate the estimated risk and average return in your portfolio. Using the efficient frontier can help us identify whether or not you are taking the appropriate level of risk for your desired return, and make appropriate recommendations.
Your risk profile is often times correlated with your investment time horizon so as a younger investor, you may be less averse to market volatility for the possibility of higher returns in the longer term. But if you are approaching or are in retirement you may be more risk averse and looking for more stability and income generation. As an individual investor, you may not realize that your portfolio is straying from the efficient frontier and that you are taking on more or less risk than necessary to achieve some of your goals.
We have found with individual investors who begin working with our team, the most common reason for drifting from the efficient frontier is a lack of diversity in their portfolio’s allocation. Sometimes, the investor could be underperforming because of too little risk, or could be outperforming because of too much risk. Building out a proper allocation that is actively rebalanced is not to eliminate risk altogether. Instead, we can help you achieve your investment goals portfolio by finding the appropriate balance of risk in your portfolio.
As always, if you have any changes in your goals or other landmark events in your or your family’s life, please let us know so we can continue to manage your investments appropriately and continue building our lifelong relationship.