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3 Keys to Bulletproof your Portfolio: Is it Overweight? Underweight? Don't Wait!

Is your portfolio veering off course on the bumpy road of today's volatile market? Is the Bull getting tired after running 3,453 Days?

In the past Month-to-Date; 9-28-2018 to 10-24-2018, the S & P 500 is down -8.85 percent.

3, 453 Days of The Bull Market, The US Bull market became the longest running bull market on record in modern financial history on August 22, 2018. The rally, which started March 9, 2009. How long can it rally? Is it nearing the end? Well, I don't have a crystal ball, but it would be prudent to take a "close look" at your portfolio at this time. Don't Wait, your future depends on it!

Problems in the stock market's come as earnings have thus far been stellar, but when we dig deeper there is worry that peak earnings may have already arrived for many companies and Interest Rate hikes are on the horizon, again. We are at the half way point of earnings season and It is my opinion, based on my 30 years of experience, that I am cautious at this time.

Here's why: Corrections are inevitable as we saw at the high of March 10, 2000 and then again in October 2007 market peak and subsequent 17-month drop. And what about the choppy markets we have seen of late? The so called Holy Grail of The Markets is supposed to be the

S & P 500, which by all accounts is the "default" choice for many investors, especially those in 401(k) plans. The S & P 500 is a value- weighted index of stocks.

The S & P 500 Index hit it's high, of 2,930.75 on September 20, 2018, as of today's writing the

S & P 500 closed October 24, 2018 at 2,656.10. The Year- to -Date return of the S & P 500 as of 10-24-18 is -0.65%, YES, that's a negative return for this year. Don't be fooled by those who quote you a return Year- Over - Year, which would be from 2017-2018, not the Year-to-Date.

I love this quote by Warren Buffet,

"Trees Do Not Grow Up to The Sky."

You could parallel that

quote to today's Markets!

A Check-Up of your Portfolio is much needed, especially at this time. Determine if it is Overweight or Underweight in it's holdings/positions, in other words; it's not the same percentage mix that you initially set up.

Key # 1: Follow Your Investment Policy Statement (IPS)

I see clients who are overweight in the S & P 500 and underweight in other investment styles, such as Balanced, International, Bonds, to name a few.

When I meet with a new client, I see so much what I call, "Pin the Tail on the Donkey" investing, especially in 401(k) plans that seemingly always go to this Index as a default.

When I ask for their Investment Policy Statement, I am asked, "What's that?"

If you have one great, if not, well, Get One!

An Investment Policy Statement (IPS) sets out your objectives, policies, investment selections, and monitoring procedures for your plan, it is the foundation for your Investment Portfolio. Don't listen to the noise of the media, listen to YOUR Investment Policy Statement which should be based on your goals and values!

A Fiduciary Financial Advisor will put one in place along with your Financial Plan or you Retirement Income Plan. Whether you are in a Qualified (Tax Deferred) Retirement accounts, such as 401(k), 403(b), IRA, SEPIRA, Simple or Keough Plans or Non-Qualified (Taxed) Plan-Traditional Investment Account, you must have an Investment Policy Statement.

Key # 2: Know if you are Overweight or Underweight

Nearly everyone is familiar with the underlying rationale behind portfolio rebalancing. or are experiencing a lot of volatility and perhaps you are overweight (Having large portion of your portfolio in one account) and Rebalancing is the key.

  • Over time, especially during extended bull or bear markets, allocations can significantly drift from their original targets. Portfolio Rebalancing, the Risk - Versus Return characteristics of a portfolio become misaligned with the investor's long-term goals and risk tolerances.

  • Perhaps no better example can be found than in the bursting of the dot-com bubble during 2001 At the peak of the market run-up in March 2000, a typical 60/40 stock- to- bond portfolio that had not been rebalanced would have seen equity holdings climb to 74 percent, while its bond holdings fell to 26 percent.

  • That's why, when the bubble inevitably burst, so many investors felt the impact of the stock market plummet so intensely. More recently, nearly identical allocation shifts could be seen during the pre-financial crisis run-up to the October 2007 market peak and subsequent 17 month drop.

  • We have had 10 years of a bull market, which has prompted a strong likelihood allocation drift and subsequent heightened risk in portfolios that haven't been rebalanced.

  • Rebalancing, A Portfolio Check - Up is a good idea for those of you who are accumulating and /or nearing retirement, 5 - 10 years or are in retirement and don't have the time or the temperment to ride the next storm. A review your portfolios is a Proactive and Prudent idea.

BFF Tip: A Trigger Driven approach may be an advantageous approach. For the previously mentioned 60/40 portfolio, consider setting an allocation drift threshold,

(e.g., + or - 5 percent).

Key # 3: Tax Smart Approaches To Rebalancing

Instead of opting to reinvest dividends and interest in the same securities already overweighting your portfolio, consider sweeping all your portfolio cash flows into a money market fund. That way, when triggers necessitate a portfolio rebalancing, these funds can be funneled toward the purchase of securities in the underweighted asset class(s) to help minimize the need for taxable sales.

  • Don't make the mistake of looking at your taxable portfolio in a vacuum. Even if target allocations in a taxable portfolio drift beyond acceptable risk limits, those limits may be offset by a reallocation of assets within your retirement accounts, without any tax impact.

  • Similarly, if you're retired and generating income through required minimum distributions, you can facilitate the rebalancing process by selecting your most profitable investments to draw down.

  • Lastly, investors with strong philanthropic inclinations may want to consider gifting highly appreciated stocks that have most contributed to a portfolio's allocation drift. It's a simple but effective approach that helps restore target allocations without requiring any stock sales.

BFF Tip: Your rational mind knows that panic and stress seldom leads to a good outcome; please, give this your attention amid the screaming and shouting that is sure to show up in the media.

Let's connect and I will help you Be Fit Financially and attain financial wellness!

Always remember as my grandmother, Marie Francois Olivier deVezin said,

"Your Health is Wealth!"

Wishing you the Best of Health, Wealth & Success,

Michele von Hoven, RFC, IAR,NP

Michele Von Hoven, RFC, NP, IAR, a Fiduciary Financial Advisor, Award Winning Author, Speaker, and named to America's Premier Experts and can be reached at:


It is important to carefully consider investment objectives, risks, charges and expenses of any investment before making investment decisions. Investing involves risk including the loss of principal. The information and opinions presented herein do not constitute a recommendation of any particular security, strategy or investment product.

Michele Von Hoven is a Registered Financial Consultant and Series 65 Investment Advisor through Investment Advisory services are offered through Pebble Management Group, LLC, Custodian TD Ameritrade Institutional.

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