Time to Re-balance?

Well, we’ve had a nice run in the U.S. stock market, especially if you look all the way back to the bottom in the spring of 2009. The question on most investors’ minds is whether it’s time to re-balance, or not.

As we noted in our post at the end of the year, the important things to pay attention to this year are; the Fed, politics, and the economy. So far, so good. The economy continues to improve, the market is absorbing big changes in the political structure without much disturbance, and the Fed seems to be holding it’s line on rate hikes.

So, although there seems to be no compelling reasons to change strategies at this point, re-balancing portfolios has more to do with preparing for the future than reacting to current conditions. There are two futures to prepare for; yours and the market’s.

Our clients tend to fall into three general age categories; Emerging Investors (20s-30s,) Peak Earners (40s-50s,) and Retirees (60+.) Each age group should respond just a little differently than the others to the need for investment re-balancing.

Emerging Investors probably need to be least concerned with re-balancing. Once their long term allocations are set it becomes more a matter of accumulation than allocation. Whatever the market brings they have years to recover. Actually, they could even welcome opportunities to accumulate stocks during long periods of market decline.

Peak Earners need to pay a little more attention to re-balancing in an effort to capture all that the market may provide over the next few years. For instance, foreign stocks have not done as well as domestic stocks for some time now. It might be a good time to kick up allocations to foreign markets. their economies are improving and in many cases their stocks are trading at lower relative prices to U.S. stocks.

In 2009 many baby boomers were in their very early 60s or even late 50s. In 2017 we boomers are heading into our 70s. This is not a time to play with fire. If you’ve had a good run and you are at or very near retirement, now is probably the time to take a little off the table until you’ve successfully made the transition to your retired lifestyle and you understand what your spending habits will be.


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