October 4, 2018 | Article

The bull market that began in March 2009 is now the second longest on record. The S&P 500 has more than quadrupled since bottoming during the Great Recession. The stock market has only seemed to go up between 2016 and the third quarter of this year.

With a market correction inevitable at some point, it’s important for your clients to check their confidence in current portfolio holdings with a comprehensive risk assessment to determine how a market correction could affect their overall investment strategies. Rebalancing is another way to maximize gains and can be especially important leading up to a correction.1

A few reminders about what you can do to help your clients rebalance their portfolios:

  • Measuring portfolio drift – Once you measure potential drift from a target percentage allocation of each asset in a portfolio, you’ll be able to suggest ways in which reallocation can help balance out the portfolio to stay on track to reaching a client’s financial goals.
  • Cash flow rebalancing – Utilize the cash flow from your recommendations to rebalance your client’s portfolios to help adjust any asset value changes that may have occurred.
  • Sell/Buy rebalancing – Rebalancing by selling a portion of assets that have gone up in value and using the proceeds to buy assets that have stayed the same or gone down in value is a great way to reduce volatility. It can even lead to increased returns depending on the nature of the underlying assets.
  • Allocation change rebalancing – Talk to your client to see if they want to change their target allocations.

While keeping in mind how the changes may be taxed, how you choose to go about rebalancing your clients’ portfolios with them is entirely up to you. However, the benefits for them could help them stay on track with achieving their financial goals.

What will you do to help keep the target allocation on track to achieving your clients’ financial goals?

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1 2018 3rd Quarter Wells Fargo/Gallup Investor and Retirement Optimism Index Survey


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