How to Reset Your Portfolio

Over the last few weeks, professional financial planners have been fielding calls from clients who are asking the kinds of questions that every professional hates to hear.

  • The Dow has reached 20,000. Should I take money off the table?
  • My preferred candidate didn’t win the election, and I think the world is going to hell in a handbasket. Don’t you think I should sell my stocks now before it’s too late?
    1. The first question is the easier one to answer. It seems to be human nature to have a strange fascination with round numbers. Why should Dow 20,000 be any different, from a pure investing standpoint, than Dow 19,774.83 or Dow 20,093.65? The questions about this magic number become even sillier when you realize that the Dow is made up of just 30 out of many thousands of American-based companies.
    2. As to the second question, the real issue is the eternal question: what’s coming next in the markets? The only truthful answer to that question, however it’s phrased, is: we don’t know. As investors, we need to take that answer very seriously.

After President Obama was elected, financial planners were fielding questions from their angry and frightened conservative clients, who were asking to bail on their stock portfolios in anticipation of the country going to hell in a handbasket. But ask yourself: how did that work out? Those investors would have missed a strong rising market.

Then, for the last five years at least, the experts were certain that bond rates were just about to rise dramatically, and many professional investors stayed ultra-short to avoid the losses. How did that work out? Bonds stayed where they were for five more years, and those investors missed out on percentage points of additional yield.

For the last four years at least, people have been saying that the current bull market is long in the tooth, what with the markets testing new highs. Over and over they felt like it was a good time to take their winnings off the table. How did that work out? They would have bailed before the markets repeatedly broke record highs.

So now we have a situation where half of the country is still reeling from the election results and predicting that the country is going to hell in a handbasket. Advisors are doing everything they can to keep clients from acting emotionally rather than rationally.

The rational way to frame the question about taking money off the table is: can you afford to lose some percentage of your assets—and that percentage figure depends on how aggressive is your asset allocation—before the markets recover? Will you have time to recover?

If you’re decumulating (withdrawing) in retirement, or just approaching retirement, the percentage you can afford to lose will be lower than it would be for a millennial investor. Whatever that amount is, you should look back historically, take a hard look at the darkest days for your particular mix of assets, and note the times it breached that floor. (Hint: check out early 2009.) Then, see if you want to change your allocations to something more conservative.

Obviously, the market always has its ups and downs. We are always available to discuss your portfolio.


Edward J. Kohlhepp, Jr., CFP®, MBA

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Protecting Your Parents ® Financially
Presidential Drawdowns

Archived Newsletters

Investment Updates

Newsletters Sign Up

Account Login

Contact Info

Kohlhepp Investment Advisors, Ltd.
3655 Route 202, Suite 100
Doylestown, PA 18902
Phone: 215-340-5777
Fax: 215-340-5788

Securities offered through Cambridge Investment Research, Inc. a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Kohlhepp Investment Advisors, Ltd., a Registered Investment Advisor. Kohlhepp Investment Advisors, Ltd. and Cambridge Investment Research Advisors, Inc. are not affiliated.

Due to various state regulations and registration requirements concerning the dissemination of information regarding investment products and services, we are currently required to limit access of the following pages to individuals residing in states where we are currently registered. We are licensed in the following states: AZ, CA, CO, DE, FL, GA, IN, KY, LA, MA, MD, NC, NJ, NY, OR, PA, RI, SC, TX, VA, VT, WA

Check the background of this firm on FINRA's BrokerCheck