You’ll soon be receiving quarter-end statements for your 401(k) and/or Individual Retirement Account. And when you do, you’ll likely be tempted simply to look at your bottom-line returns before chucking it in the trash or hitting the delete button. But did you know you can use your statement to help better manage your account? Specifically, you should take the time to review your asset allocation and make sure it still fits your needs and is appropriate given the market and economic outlook.
Our Research Center recently made a few changes to our clients’ accounts, because we want them to have the right exposure to the right investments. If you want to make sure you’re similarly positioned, here are two big changes worth considering:
Changes to stocks
We’re selling some of our U.S. stocks and buying international equities, and here’s why: the recovery of overseas economies is lagging behind the United States, which could mean more growth opportunities abroad than here at home. Simply put, purchasing international stocks at this lower price point is a better value than buying U.S. stocks – right now, at least.
So, how much are we moving into international? While it depends on your risk tolerance, we’re looking at a 70-30 domestic-international split for the stock portion of a portfolio. Keep in mind that’s for our clients with higher risk tolerances – but even if you’re close to or in retirement, international equities are still a great way to diversify your holdings even at smaller percentages.
Changes to bonds
You can’t mention bonds without discussing interest rates. Most market analysts, including our Research Center, expect the Federal Reserve to first raise its key interest rate toward the end of this year. When that rate starts to increase, the value and price of current bonds will drop.
However, bonds still play a key role in a diversified portfolio by helping to balance out some of the market risks and volatility of stocks. It’s really about making sure you’re invested in the right types of bonds. We have recently reduced our holdings in high-yield and floating-rate bonds in favor of what we call “intermediate-term” or “multi-sector” bonds. These bonds have fund managers with the flexibility to hold what they consider the best bonds given the current rate environment.
No one can predict with certainty what will happen to the market and economy in the common months. However, we rely on the analysts and economists in our Research Center to help guide us – and we believe these allocation changes help our clients better manage overall risk and maintain opportunities for growth.
If you haven’t revisited your investment lineup in a while, give us a call. We’re here to help you keep your savings and investing goals on track through all market scenarios and economic headlines. Let us do the heavy lifting for you!
SOURCE: Expert Investing Insight – Read entire story here.
