Written by Lance Roberts, Clarity Financial
A Conservative Strategy For Long-Term Investors
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.
Short-Covering Rally As Expected
As noted last week:
“With the market deeply oversold short-term we are expecting a bounce which we can rebalance into and remain defensive.
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. The increasing ‘trade war’ will only succeed in advancing the next recession.”
As reiterated in the main missive above this week, the “risks” still outweigh the “rewards” as we head deeper into the summer months. Importantly, don’t mistake an oversold, short-covering, rally as a bullish sign. More often than not, it is a trap.
We have remained patient over the last several weeks. Last week we stated:
“Should get a bounce next week. On that bounce look to take the following actions.”
- If you are overweight equities – take some profits and reduce portfolio risk on the equity side of the allocation. Raise some cash and reduce equities to target weights.
- If you are underweight equities or at target – rebalance risks, look to increase cash rather than buying bonds at the moment, and rotate out of small, mid-cap, emerging, international markets.
It is time take some action this coming week.
If you need help after reading the alert; don’t hesitate to contact me.
Thank You, 401k Plan Manager Is Almost Ready
Over the last couple of weeks, we have discussed the launch of our “live” 401k plan manager 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.
We are building models specific to company plans. So, if you would like to see your company plan included specifically, send me the following:
- Name of company
- Plan Sponsor
- A print out of your plan choices. (Fund Symbol and Fund Name)
I have gotten quite a few plans, so keep sending them and I will include as many as we can.
If would like to offer our service to your employees at a deeply discounted corporate rate please contact me.
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.)
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