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Do You Have An All Weather Portfolio?

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?

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Chris has 10+ years of experience in the financial services industry. Prior to Personal Capital, he was a Supervisor and Broker for Scottrade. He has completed his Master of Business Administration (MBA) from the University of Colorado and has earned the Certified Financial Planner ™ designation. Outside of the office, Chris enjoys running, hiking, skiing and other outdoor activities.
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This year, my top financial priority is:

Building my emergency fund
Paying off high-interest debt
Budgeting better
Saving for a short-term goal, like a vacation or new car
Increasing my investment contributions
Maintaining status quo - I’ve got this under control

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