Dow Hits Another Record Show 60

A Market Watch article describing the chart said, “If you have a 401(k) and you’re of a nervous disposition, you probably don’t want to look at the chart.

Even by the standards of GMO, the super-cautious money management firm in Boston best known for its famous co-founder Jeremy Grantham, say 'it’s terrifying.'”

You’d never know such dire forecast exists if you only check your portfolio balance. For perspective; around last year this time the Dow was trading around 26,000 points. Ten years ago, the Dow was trading around 14,000 points. That’s about a 60% growth in the Dow over the last decade.

It’s almost like the index has been on a sprint. What happens when the sprinter runs out of air? A pullback happens. When the market corrects, if you haven’t done your due diligence by preparing, you may be impacted.

If you’ve worked with a financial advisor, you may have had a meeting once a year where the planner said “we need to rebalance your portfolio.” Does that sound familiar?

The advisor may make changes to your account. You may be weighted too heavily in bonds or stocks, and the advisor wants you to have the appropriate split. We typically don’t talk in those terms at our firm.

We speak on asymmetrical versus symmetrical terms. The balanced portfolio above is symmetrical. It’s a nice clean circle so to speak. Fifty percent bonds, and fifty percent equities.

We use an asymmetrical approach. The first thing we do is we use a bond replacement that does not have the interest rate risks that bonds have. Also, it produces returns bonds produce when interest rates are normalized. Our bond replacement strategy is our client's safety net where they may draw income from in down markets.

Secondly, we use portfolio managers that focus on algometric investing techniques. This isn’t a “buy and hold” strategy like most symmetrical financial advisors would use. We remove the human emotion of trading in the market and rely on computer algorithms to dictate when we should buy, hold, or sell.

Remember the above situation where people just want to hold on for a little more growth in the Dow? They are using human emotion to make their decision, but this isn’t to be diminished. We’re human after all. We are emotional creatures, but our money isn’t emotional and the stock market doesn’t care what we think may happen.

We’ve found asymmetrical modeling allows our clients’ money to be all weather proof. If you’d like to discuss this further or have questions, you  call us at 864.641.7955.

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