We have received numerous emails and telephone calls fromclients regarding recent transactions within their portfolios and thought it agood idea to respond via our weekly Chart Talk. Other than transactions intended to maximizeportfolio return within the stated objective of our client, Fagan Associatesperiodically takes the time to rebalance portfolios to keep it in line with thestated objectives of the client or to reduce risk. Portfolio rebalancing entails adjusting theweight of different assets and/or asset classes within the portfolio.
“For example, Figure 1 shows how a portfolio that startedout as a moderate risk portfolio in 2003, with 60% stocks and 40% bonds, wouldhave drifted to 69% stocks and 31% bonds by the end of 2007 if it were neverrebalanced. That means that it had become a riskier portfolio, with higherexpected volatility, just before the global financial crisis hit. The resultwould have been a bumpier ride than intended as stocks declined sharply in 2008and 2009.
By the time the market reached its bottom in 2009, stockdeclines had caused the portfolio to drift to a 50/50 mix, with less stocks anda more conservative allocation than intended right before the market recoverybegan. That left the portfolio not positioned with the intended level of riskto fully take advantage of the strong returns that typically occur in the earlystages of a recovery. By the end of 2013, the portfolio would have drifted to71% stocks and 29% bonds. And by the end of 2018, it would have held 76% stocksand just 24% bonds, shifting from the intended moderate risk portfolio to anaggressive portfolio even more overweight stocks than before the financialcrisis.” (Source, Charles Schwab &Company)
By keeping a portfolio in line with the stated objectivesof the client, Fagan Associates removes the emotions from the equation duringperiods of market corrections as well during those periods where greed takeshold, potentially allowing for smoother ride with perhaps less risk.
“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
Copyright (c) 2024 Clearnomics, Inc. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
