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Take a Look at Your Portfolio

We have seen a nice bounce back from the bottom in March 2020. As of this writing, in 2020:

SPY (S&P-500 ETF): -10.43%
GLD(Gold ETF): +12.35%
IYR (US Real Estate ETF): -17.65%
TLT (Long US Treasuries): +25.04%
VXF (US Russell 2000 stocks): -17.24%

Wow! You mean stocks are not back to our highs? No stocks are not even back to the start of the year 2020. As you see, bonds and gold are up quite a bit and helped our methodology results this year. As I wrote in recent blogs, I removed Russell 2000 stocks and real estate from our portfolios earlier this year because of the unprecedented Covid-19 situation. Actually, the VXF was removed before the crash. I sold half the real estate before the market crashed, and sold the other half during the decline.

What should you do now? Well, this blog is educational in nature and not intended to be investment advice, so I won’t say “do this” or “do that”. However, the way I’ve been managing our portfolios is to:
1. Raise cash early in the crisis to reduce risk / volatility in our accounts.
2. Gradually invest some of our cash on the way down.
3. Gradually rebuild the cash cushion by selling on the way up.
Go back to our normal methodology after the volatility in the markets returns to “normal” or something like it was in the year or so before the crash.

“Wait !,” you say. “It’s too late! My advisor (or myself) did not raise any cash ahead of time.” “Heck! He/she/me just tells me to hang on and rebalance every quarter and hope for the best!”. So how does that make you feel?

In my view, it is not too late to think about implementing your own version of the 1-2-3 plan above, depending on how close you are to retirement or needing the money.

Noone knows the future. But the markets, the Fed and Congress, and person who is signing those aid checks 🙂 … have given us a great gift in the stock market rally. Think of three different scenarios:
1. Stocks roll over and go back to the lows of last month. Would you be glad you raised cash? Would you kick yourself for NOT raising cash?
2. Stocks continue to rally back to the all-time highs in February. Would you kick yourself for raising cash? Would you be glad you held on to your stocks all the way back?
3. Stocks keep moving sideways. . . up a few percent, then down a few percent, like the last couple of weeks. Would you feel good or bad about your plan?

If you think in terms of scenarios: best case, worst case, middle case, making the decision may be easier. If you cannot live with the worst case scenario, then you might want to think about how to eliminate that scenario or at least mitigate it.

Take care and stay safe

Dale