The themes above happen to be some of the more common we have all heard recently, with each being attributed to the recent market sell-off. While we don’t dismiss these as unimportant, whether and why the market goes up or down during any period is really only important relative to your specific needs.
Here at Bay Point, we spend a great amount of planning time determining each client’s cash needs and “time horizon,” which provides the framework for deciding the appropriate amount of shorter-term, safer investments.
These safer investments are typically represented by money market funds, CD’s, Treasury Bills and various “lower volatility” funds, such as bond funds. We sometimes refer to the amounts we have allocated to each investment type as “buckets”, with the short-term and intermediate-term buckets designed to hold enough safer investments to help us ride out a protracted period of lower stock values.
Additionally, most funds within each client portfolio generate income, mostly in the form of dividends and interests, that can be used for more immediate cash needs.
This allocation and cash planning is intentionally designed to allow us to weather the storm and, as stocks begin to increase in value again, have the opportunity to review and adjust each client’s portfolio based on their specific circumstances.
The time until you need to convert an investment to cash is often referred to as the time horizon. A significant amount of most client portfolios are matched to time horizons that are many years out. We accept more volatility to earn a higher return on these holdings – recognizing that this portion of the overall portfolio will not be needed until much later. Thus, the market selling off in the short-term shouldn’t have any impact on your long-term plan.
We continue to monitor all portfolios, rebalance as necessary, and make tax-related trades as needed. We understand that times like this can cause apprehension and so, as always, please do not hesitate to give us a call if you would like to discuss your portfolio or planning needs.
The Bay Point team wishes everyone a very happy holiday season and safe and healthy new year.