• Investing & Markets

Do You Have An All Weather Portfolio?

September 9, 2014 | Chris Carucci, CFP®

Over the Labor Day weekend I got the opportunity to hike a 14er with some friends. Hiking a 14er – mountain peak above 14,000 ft. – is one of the must-do things in Colorado for the challenge and picturesque views you are rewarded with. We drove out to Minturn CO, which is right outside Vail, to camp and hike the next day. When we left at about 5:30am to start the hike the forecast called for sunny skies that day.

Having done a few 14ers, I’ve learned that weather can come in very quickly and there are a few things you always bring – regardless of the weather forecast. Sure enough our sunny forecast turned into rain, sleet and then snow. But having the proper equipment for these conditions allowed the journey to continue.

Being a big believer in having a diversified portfolio, I couldn’t help but think of the parallels from this hike. There have been a lot of sunny days in the stock market recently and it’s easy to forget the weather can change quickly. Just like how I can’t go back down to camp when the weather changes to get some more appropriate gear, investors cannot decide they wish to be more diversified when the weather in the stock market has already changed.

Markets move too fast to think you can wait for a sign that it’s time to hedge. You have to have the appropriate gear with you on the hike and you have to be diversified at all times. It’s easy to forget the cyclical nature of investments and want to invest in what has done well recently. Lately large-cap US stocks have done very well, but sometimes it’s small-cap stocks or bonds or international stocks that lead the way. Here is a snapshot of various asset class returns.

The two portfolio examples below are dependent on your risk tolerance, time horizon, investment knowledge and total assets. It’s best to talk to a Personal Capital Financial Advisor to figure out what works best for you.

Growth Portfolio

A long term growth allocation with moderately lower volatility than an all stock portfolio. This allocation is often suggested for those who are several years from retirement or who need or want high growth in retirement.

Growth Portfolio Allocation

Moderate Portfolio

A long term growth allocation with notably lower volatility than an all stock portfolio. This allocation is often suggested for conservative investors in their working years or moderate investors approaching or in retirement with some need for growth.

Moderate Portfolio Allocation

Stay Diversified

It’s important to have exposure to multiple areas and to stay disciplined in being exposed to them. Trying to load up on the market segment that has done well recently or trying to guess which one will outperform going forward is a fool’s game. Stay diversified. Predicting the weather at 14,000 ft. is no more reliable than predicting where the stock market will go.

And sometimes it snows in August.

Cold Hike

Same hike – where did all the sunshine go?

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