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Tired of Hearing, “Just Ride it Out”? Here are 3 Key Factors to Evaluate Your Advisor

Tired of Hearing, “Just Ride it Out”? Here are 3 Key Factors to Evaluate Your Advisor

| March 09, 2020

After the S&P 500 returned 30% in 2019 we’ve seen the tides change faster than ever. Over the last two weeks headlines have either read “New Coronavirus Scares” or “Dow tumbles/jumps 1000 points”. Last week the stock market entered correction territory faster than any point in the last 30 years. 

While many people are too nervous to look at their accounts, or are seeing them shred last years profits, this is an important time to evaluate your portfolio but more importantly your advisor.

Days have changed from transaction based accounts so many people are paying their advisor a fee for management - what are you getting for that fee? And if you’re just hearing, “Well, you just need to ride this out” you should probably consider evaluating your relationship.

Here are 3 Key Factors to evaluate your advisor and see if they’re worth what you’re paying.

  1. Proactive Adjustments to Your Portfolio & Downside Protection

By now most people will agree that it’s impossible to consistently time the market. But that doesn’t mean that there shouldn’t be proactive changes to either provide some downside protection or additional opportunities for growth. As an example, January 7th, we began harvesting some of the profits from 2019’s S&P 500 return and reallocated to gold. No, not because we knew Coronavirus was going to strike but because after a 10 year bull run the markets more susceptible to headline risk and likely to see more volatility. Since that change our gold allocations are up 3.75% while the market is negative 8.44%. That’s over a 12% difference in positive performance! 

Being proactive is one of the most important pieces to investment management and we proactively initiate downside protection triggers in clients stock portfolios to limit on large drawdowns like this. The two key benefits in doing this are limiting losses in large market declines and creating cash for buying opportunities when appropriate.

2) Find Opportunity in Volatility

Volatile times create great opportunity - if you look close enough the volatility will expose weaker companies and sectors and highlight more stable and opportunistic investments. With the Coronavirus, travel, airlines, and companies with heavy China exposure have been hammered.  As an active advisor, we reacted to this information by lowering clients holdings in these three main areas but also being aware of where we could reallocate for better upside exposure. 

The cash we raised from our sells, we’ve been slowly reallocating in to parts of the market that have shown significantly more resilience during the upswings and less downside capture on down days. 

3) Has a Plan Moving Forward

We all wish we had the crystal ball but even without one you can make smart investment decisions. Having a plan moving forward with volatility can help clients be more at ease and know that their account is being monitored. Our clients feel confident in our management skills because we clearly and consistently communicate their portfolio performance relative to the market but also give them our game plan and key factors we’re watching for future moves in their portfolios. If we’re watching a specific stock we’ll communicate at what price we think it’s an attractive purchase. One way or another, we have a plan for future market moves to keep our clients accounts in the best position relative to their goals.

While I don’t believe this volatility is leaving the markets anytime soon, I do believe that there are many cases to NOT just “ride this out” but look for the opportunities to improve your portfolios positions, limit exposure to weaker areas of the market, and position yourself well to enjoy the gains when we see the recovery.

Please reach out with any questions or if you’d like to have us provide a complimentary portfolio review. You're able to easily schedule a call at your convenience from the drop down at our Contact tab  -- >  Schedule a Meeting.

Investing involves risk including loss of principal. All indices are unmanaged an may not be invested into directly.

No strategy assures success or protects against loss.