A Covid-19 update from your PLC Wealth team

To say the last couple of weeks have been unexpected, unparalleled and dizzying would still be understating exactly what we have lived through in the last few weeks.  Based on further news today (specifically, the Stay at Home Orders issued by Wake County, NC for our local clients), most of us will be sheltering in place for the coming weeks, as we should.  I have listened intently, as I am sure you have, to all sides of the discussion that has carried on since the beginning of the outbreak.  At this point, the experts are making the case for the seriousness of the virus as it spreads exponentially, and that it is likely that the healthy and optimistic among us could be putting our most vulnerable at risk.  Slowing down our movement even further, whether by choice or by requirement, seems to be inevitable for a while longer to give us all the best opportunity to get through this.  While we do not know how long this Covid-19 virus will last, I want to take a few moments to speak to you directly about what we are doing as a firm and how you can continue to reach us during these times.

We have implemented many changes in the last couple of weeks as part of our Business Continuity Plan due to Covid-19.  Thankfully, we were prepared for a remote working environment, and hopefully you have seen no interruption in the normal service from our team.  We have all set up our home workspace.  This give us access to our email, phone calls, and client files just as easily as we have them in the office.  Our phone service is fully digital which means we can take it with us wherever we go.  If you call the office and dial my extension, it will ring my mobile phone.  If I call you from my mobile phone, I will be doing so from my office line.  We also have a fully digital and secure document management system for our firm which means we can safely access all your files at any time of day from any location in the world.  Additionally, all our portfolio management, financial planning and client relationship software is cloud-based and accessible from any location.  Believe it or not, it really did not take much time for PLC Wealth to convert to a virtual firm with the same capabilities as when physically in the office.

Now, obviously, there are some challenges.  It is impossible to fully replace the face-to-face relationship, both for our internal operations and for our client relationships.  We are utilizing a secure and compliant messaging tool for internal communications.   While there may be times that we need to access the office, we are attempting to have only a 1-person max in the office at any time.  We will also plan to continue with client meetings moving forward through virtual meeting technologies such as Zoom.  If you do not have access to a computer for such a meeting, we can still have a conversation the old school way…over the phone…in order to make sure that we do not fall behind in our relationship with each of you.  Again, if you need us in the meantime, we are an email or phone call away, just as we have always been.

There are a few logistical items to cover: First, mail will be checked regularly, but maybe not every day.  Additionally, we have always made the effort to suggest linking your personal bank account to your brokerage accounts to allow for quick money movements back and forth, should they be necessary.  Since we are no longer at the office, a time like this makes it necessary.  So, if you need to make an IRA contribution or want to add funds to your brokerage account, we can still do that by an electronic transfer.  Getting money from your accounts is just as easy, or we can have a check mailed to you.  The bottom line is that getting money from your accounts or to your accounts is just as easy as always.  Finally, if you have actual stock certificates, those must be mailed directly to TD for deposit in your account, so just let us know if you need the mailing address.

Unfortunately, times of crisis create opportunities for bad actors.  There are already stories of scams coming to the surface, so be prepared and know what to look for:

 

  1. – There are no miracle drugs or remedies for Covid-19 at this time so don’t fall for this one.  And do not click on any links that may be in an email stating such things, as the link may be another way to inject a virus on your computer.
  2. – Be very skeptical of any investment ‘opportunities’ with research claims that are no supportable.  People will make wild claims to prey on other’s hopes and inability to use the rational brain in times of stress.
  3. – Never, never, never disclose your social security number, account numbers, or any other piece of Personally Identifiable Information (PII).  There are rumors that spam calls and emails are already going out claiming that thsi information is needed to get your piece of the Stimulus bill or a tax refund.  Hold on to your PII like you (financial) life depends on it.
  4. – Generally, just be skeptical in these times of anything that seems too good to be true.  If you are not sure, get in touch with us to talk through it.

 

Let me leave you with a little encouragement in the midst of Covid-19 .  Take this time to do something that many of us no longer do naturally on our own…slow down, exercise (by yourself), rest, re-energize, call someone you haven’t spoken with in a while, or binge watch movies with your family that you never have the time for…but mostly, just look around you to see all of the blessings that you inevitably still enjoy.  Sometimes, when we are not able or willing to do that which is in our best interest, it is necessary for it to be forced upon us.  We find ourselves in one of those times in history.  We are a creative and adaptive species so I look forward to hearing about some of the ways that you will get through this…because you will get through this.  I will leave you with three pieces of advice that I am confident will be good for you in the long run…Wash your hands, don’t touch your face, and don’t touch your stocks.  Know that we are committed to continuing to serve you and your family. We will strive to provide you with an even higher level of service than that which you have come to expect from us.  If you need anything at all, even if it is just to have a conversation about the events of the day, please let us know.  We are here to help.

Carpe diem,

Josh and the PLC Wealth Team

The Vital Role of Strategic Rebalancing

If there is a universal investment ideal, it is this: Every investor wants to buy low and sell high. What if we told you there is a disciplined process for doing just that, and staying on track toward your personal goals while you’re at it? Guess what? There is. It’s called strategic rebalancing.

Strategic Rebalancing: How It Works

Imagine it’s the first day of your investment experience. As you create your new portfolio, it’s best if you do so according to a personalized plan that prescribes how much weight you want to give to each asset class. So much to stocks, so much to bonds … and so on. Assigning these weights is called asset allocation.

Then time passes. As the markets shift around, your investments stray from their original allocations. That means you’re no longer invested according to plan, even if you’ve done nothing at all; you’re now taking on higher or lower market risks and expected rewards than you originally intended. Unless your plans have changed, your portfolio needs some attention.

This is what rebalancing is for: to shift your assets back to their intended, long-term allocations.  In fact, this is part of the best practices suggested in my recent blog post for the New Year.

A Rebalancing Illustration

To illustrate, imagine you (or your advisor) has planned for your portfolio to be exposed to the stock and bond markets in a 50/50 mix. If stocks outperform bonds, you end up with too many stocks relative to bonds, until you’re no longer at your intended, balanced blend. To rebalance your portfolio, you can sell some of the now-overweight stocks, and use the proceeds to buy bonds that have become underrepresented, until you’re back at or near your desired mix. Another strategy is to use any new money you are adding to your portfolio anyway, to buy more of whatever is underweight at the time.

Either way, did you catch what just happened? Not only are you keeping your portfolio on track toward your goals, but you’re buying low (underweight holdings) and selling high (overweight holdings). Better yet, the trades are not a matter of random guesswork or emotional reactions. The feat is accomplished according to your carefully crafted, customized plan.

Portfolio Balancing: A Closer Look

We’ve now shared a simple rebalancing illustration. In reality, rebalancing is more complicated, because asset allocation is completed on several levels. First, we suggest balancing your stocks versus bonds, reflecting your need to take on market risk in exchange for expected returns. Then we typically divide these assets among stock and bond subcategories, again according to your unique financial goals. For example, you can assign percentages of your stocks to small- vs. large-company and value vs. growth firms, and further divide these among international, U.S., and/or emerging markets.

One reason for these relatively precise allocations is to maximize your exposure to the right amount of expected market premiums for your personal goals, while minimizing the market risks involved by diversifying those risks around the globe and across sources of returns that don’t always move in tandem with one another. We, and the fund managers we typically turn to for building our portfolios are guided by these tenets of evidence-based investing.

Striking a Rebalancing Balance

Rebalancing using evidence-based investment strategies is integral to helping you succeed as an investor. But like any power tool, it should be used with care and understanding.

It’s scary to do in real time. Everyone understands the logic of buying low and selling high. But when it’s time to rebalance, your emotions make it easier said than done. To illustrate, consider these real-life scenarios.

  • When markets are down: Bad times in the market can represent good times for rebalancing. But that means you must sell some of your assets that have been doing okay and buy the unpopular ones. The Great Recession of 2007–2009 is a good example. To rebalance then, you had to sell some of your safe-harbor holdings and buy stocks, even as popular opinion was screaming that stocks were dead. Of course, history has shown otherwise; those who did rebalance were best positioned to capture available returns during the subsequent recovery. But at the time, it represented a huge leap of faith in the academic evidence indicating that our capital markets would probably prevail.
  • When markets are up. An exuberant market can be another rebalancing opportunity – and another challenge – as you must sell some of your high flyers (selling high) and rebalance into the lonesome losers (buying low). At the time, this can feel counter-intuitive. But disciplined rebalancing offers a rational approach to securing some of your past gains, managing your future risk exposure, and remaining invested as planned, for capturing future expected gains over the long-run.

Costs must be considered. Besides combatting your emotions, there are practical concerns. If trading were free, you could rebalance your portfolio daily with precision. In reality, trading incurs fees and potential tax liabilities. To achieve a reasonable middle ground, it’s best to have guidelines for when and how to cost-effectively rebalance. If you’d like to know more, we’re happy to discuss the guidelines we employ for our own rebalancing strategies.

The Rebalancing Take-Home

Strategic rebalancing using evidence-based investment strategies makes a great deal of sense once you understand the basics. It offers objective guidelines and a clear process to help you remain on course toward your personal goals in rocky markets. It ensures you are buying low and selling high along the way. What’s not to like about that?

At the same time, rebalancing your globally diversified portfolio requires informed management, to ensure it’s being integrated consistently and cost effectively. An objective advisor also can help prevent your emotions from interfering with your reason as you implement a rebalancing plan. Helping clients periodically employ efficient portfolio rebalancing is another way that PLC Wealth Management seeks to add value to the investment experience.