Written by Lance Roberts, Clarity Financial
A Conservative Strategy For Long-Term Investors
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There are 4-steps to allocation changes based on 25% reduction increments. As noted in the chart above a 100% allocation level is equal to 60% stocks. I never advocate being 100% out of the market as it is far too difficult to reverse course when the market changes from a negative to a positive trend. Emotions keep us from taking the correct action.
Being Patient…Again
As noted last week:
“The market tried to rally last week but failed to hold above the 50-dma which negated our plans to increase equity exposure. Next week, it is critical for the markets to muster a rally or we are going to wind up retesting the 200-dma.”
That rally failed to occur and while we didn’t test the 200-dma, yet, we are bouncing along the tops of the Oct-Nov highs. This support must hold or we are going to see a bigger correction this summer.
I would again encourage you to read the commentary above, the bulls, along with the media, are betting on things which have a very low probability of actually occurring.
Remain patient again this week, and continue to follow rebalancing risk management measures for now.
- If you are overweight equities – take some profits and reduce portfolio risk on the equity side of the allocation. However, hold the bulk of your positions for now. Having some extra cash is not problematic.
- If you are underweight equities or at target – remain where you are until the market gives us a better opportunity to increase exposure to target levels.
If you need help after reading the alert; don’t hesitate to contact me.
Exciting News – the 401k Plan Manager is “Going Live”
We are getting very close to rolling out a “LIVE” version of the 401-k allocation model which will soon be available to RIA PRO subscribers. You will be able to compare your portfolio to our live model, see changes live, receive live alerts to model changes, and much more.
This service will also be made available to companies for employees. If would like to offer our service to your employees at a deeply discounted corporate rate please contact me.
Stay tuned for more details over the next couple of weeks.
Current 401-k Allocation Model
The 401k plan allocation plan below follows the K.I.S.S. principle. By keeping the allocation extremely simplified it allows for better control of the allocation and a closer tracking to the benchmark objective over time. (If you want to make it more complicated you can, however, statistics show that simply adding more funds does not increase performance to any great degree.)
401k Choice Matching List
The list below shows sample 401k plan funds for each major category. In reality, the majority of funds all track their indices fairly closely. Therefore, if you don’t see your exact fund listed, look for a fund that is similar in nature.