Quarterly Market Report: 3Q 2018
Third Quarter 2018 has flown by. Despite all the headlines, stocks are up over the last 12 months and U.S. stocks in particular were up sharply this quarter. While I know the headlines can be distracting, a disciplined investment process almost always wins out over time.
Click here to check out the latest version of the Quarterly Market Report.
Third Quarter tends to be quiet thanks to summer vacations, so I use this time for a deep-dive evaluation of the Transformative investment portfolio. A good long-term investment strategy should change very little over time, but it’s still good practice to regularly evaluate what we’re doing with a critical eye.
ASSET ALLOCATION & PORTFOLIO COMPOSITION
As part of this review, I revisit the composition of both the equity and fixed-income sides of the portfolio to ensure that the composition best matches our investment philosophy, goals and the macro-economic environment. The blend of these two strategies (stocks & bonds) is your overall asset allocation. Studies have shown that this drives over 90% of your overall portfolio returns. We adjust this ratio of stocks and bonds based on your specific risk tolerance and portfolio needs through the financial planning we do together. However, a review of the component strategies is part of my regular process.
UNDERLYING MANAGER REVIEWS
Also as part of the review, I examine all of the investment funds and companies that we use in the portfolio as well as the dozens of others that are on my watch list. Each manager and fund must meet strict criteria before I consider it for inclusion in the portfolio. While there were no changes after this review, I am constantly scanning the investment universe for the best options.
At Transformative Financial, we’re different in that we rebalance your portfolios when they need rebalancing – not when it’s most convenient. Many firms schedule rebalancing for a certain month each year, but that may not be the best timing for your portfolio.
Think of portfolio rebalancing as our way of methodically “buying low and selling high” over time. I use a numbers-based process that is centered around market volatility rather than operate on gut-feel. I think you all know how much I am committed to having a process-based approach to everything. As market volatility crept up in early October, you may have noticed a few trades in your portfolio to adjust.
Of course, I will continue to monitor the markets and make adjustments as needed. Thank you for your continued trust in Transformative Financial.
-Patrick King CFP®