“Turn and face the strange. Ch-ch-changes.” It’s hard to say exactly to what David Bowie was referring in his song Changes. Not surprisingly, I am going to use some of this great song’s lyrics and try to tie it back to the markets. As I have said in a previous post, you’re welcome for putting this tune in your head. If you aren’t familiar with the song, you’re either very young or you need to try to get out a little more! 😊 You can hear it here:

Changes in the markets are, in fact, inevitable. And, it may be a good time to actually “turn and face the strange” when it comes to your investments. In this case, I am not talking about anything drastic, but it is a little bit strange and counter to human nature: Sell some of the stuff that has gone up, and buy some of the stuff that has either stayed level or not performed very well. Obvious, right? Well it’s easy to do, but not easy to actually execute for the individual investor (as evidenced in the chart here).

The more common term in the portfolio management world is rebalancing. It means adjusting your investments back to the way you initially intended when you started your account (401(k), IRA, Brokerage Account, etc.). If you are a good diversifier, some investments in your mix have gone up more than others over the past months or year(s), and you need to rebalance them to their correct percentages. In 401(k) and other work-related retirement plans, there is sometimes an option to have this happen automatically. Most experts recommend quarterly, semi-annually, or annually. Either way, it’s never a bad time for a rebalance (although doing it too frequently really doesn’t help that much!).

There was a good example chart in a somewhat comical commentary from Charles Schwab’s Jeffrey Kleintop called “How To Avoid A Shark Attack.” His overarching point was essentially to rebalance.

“The chart below shows what stock market shark attacks look like using the relative performance of US and international stock indexes. The lines are just one index divided by the other. When the blue line is rising international stocks are outperforming US stocks. When the orange line is rising US stocks are outperforming international stocks. They are mirror images of each other…the shark’s jaws are wide open again after 10 years of US stock outperformance.” Time to rebalance?



Okay, that’s all I’ve got this time since the Washington Capitals are getting ready to play Game 3 of the Eastern Conference Finals against the Tampa Bay Lightning. Sorry for the shameless plug, but LET’S GO CAPS!

For you Caps fans, here’s a video of the end of Game 5 vs. the always-dominant and dreaded Penguins. I was fortunate enough to attend with some friends, and needless to say, the energy was incredible!



Categories : Financial Planning

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