Is it Time to Leave Your Current Investment Holdings?

Is Now Time to Leave Your Current Investment Holdings

Do you know if it is time to leave your current investment holdings or even the stock market in general? Should I stay or should I go now? As the song goes “if I go it will be trouble but if I stay it could be double”. Of course I am not talking about relationships, rather I am referring to when you pull the trigger to sell your positions. Do you have a buy-sell discipline? Unfortunately for most investors, they do not have a formal process that determines if they should make major changes to their investment holdings. Rather, they make changes based on emotions or after something significant happens within the market. This is NOT a very good long-term strategy because unfortunately you are probably hurting your portfolio rather than helping it. Selling your holdings after they have gone down in value or buying positions after they have shot up in value are the equivalent of buying high and selling low. There can always be costs associated with mistiming both exiting and entering the market.

Don’t Leave your current investment holdings because of the nightly news

There is currently significant market volatility thanks to the corona virus outbreak. Many are wondering if this will have a long-term negative effect on their investments. As an Investment Committee, we conducted a study on the long-term effects of new disease outbreaks. We looked at the last 25 epidemics where at least 100 fatalities occurred, which took us back to the 1950’s. Most of the volatility was short-term, occurring in the first 60 days of each new event. If you would like a chart showing the specific epidemics and the volatility associated with specific periods, please contact us. Currently, we are not making any changes to our Investment Models. The stock market in general can be somewhat erratic, although if you have a sound investment management and screening process it can be more predictable that you may realize.

The investment strategy used by our firm, has a well-defined “buy-sell discipline”. This essentially means that there are very specific factors that help us determine when we should be in the market (versus investing in cash) as well as what specific areas of the market appear to offer the best opportunities. We will invest in areas of the market that show stronger performance momentum and conversely avoid areas with weaker momentum. All areas of the stock market will not be strong or weak at the same time. Wouldn’t it be nice to know what areas of the market are currently having strong or weak momentum BEFORE you invest? We decide what specific asset classes and sectors we include in our models based on how strong those areas are performing in current time. Many advisors employ a buy and hold method. They invest in the same asset classes over the long run. They make occasional FUND changes, but they do not change the underlying asset classes and sectors that comprise their portfolios. They periodically rebalance accounts to take from the areas that overgrew and give back to the areas that underperformed. We do not rebalance accounts, which essentially means take from the winners and give to the loser funds. Rather, we keep our models invested in the winners, until the momentum shifts and then we reallocate to a new area that is showing positive performance momentum. We keep our winners until they stop winning.

Only Leave your current investment holdings When ALL Major indicators point to sell.

The last and possibly most important distinction is we have a stop loss set up in our methodology that alerts us if we should consider leaving the market all together. We look at six distinct indicators and if four or more of those indicators turn negative, it is our sign that the stock market will not be the best opportunity for our clients and therefore we will move to cash until a majority of those indicators turn positive again. We will take what the markets will give us, and during the years the markets will be volatile and negative we are willing to be defensive to protect our client’s previous returns and principle. How desirable would it have been to have missed the vast majority of the 2008-2009 financial meltdown?

It is important as an investor to understand there are significant implications associated with both how your current portfolio is invested as well as timing when to get in or out of a specific asset class, sector, or the market in general. You should know if your advisor has a formal buy-sell discipline or they if use a buy and hold and rebalance method. You should also find out if there is a formal stop-loss discipline in place to alert if they should consider moving your account out of the market due to a significant downturn. If you are unsure, we would be happy to help you evaluate your current portfolio. It really is important to know “should you stay or should you go.”

Ashley Rosser, President

Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.

Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Wealth Partners in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.

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