Another year is in the books. It’s almost time to turn the calendar to 2020. For many investors, this is the time to look back on the past year and make adjustments for the upcoming year.
The performance of your portfolio in 2019 depends on your allocation and your specific investments. However, generally speaking, investors enjoyed positive returns in 2019. Through November 22, the top market indexes had the following returns:
S&P 500: 24.60%1
Those positive returns haven’t come without a few bumps in the road though. The markets experienced a few sharp downturns in 2019, especially through the summer. Issues like the trade war between the United States and China have created uncertainty among some investors. 4 However, other developments, like interest rate cuts and strong corporate earnings, have helped extend the longest bull market in history.4
What’s in store for 2020? When it comes to investing, it’s impossible to predict the future, especially in the short-term. However, if you are concerned about market volatility, there are steps you can take to minimize your exposure to risk. Below are a few action items to consider as we head into the new year:
Review your risk tolerance.
Is your allocation aligned with your risk tolerance? If you’re like many investors, you may not actually know what your risk tolerance is. Risk tolerance is your specific ability to withstand volatility in your investments. Risk tolerance is unique for each person and is based on a wide range of factors, including your time horizon, your comfort level with risk, and your financial goals and needs.
Risk tolerance also changes over time. If you’re approaching retirement, you may not have the same tolerance you had when you were younger. Often, people who have decades until retirement have significantly more tolerance for risk because they have more time to recover from a loss. If you’re a few years away from retirement, you may be much more sensitive to a market downturn.
Now is a good time to review your risk tolerance and make sure your allocation is appropriate. A financial professional can use a variety of tools and methods to accurately gauge your tolerance for risk. He or she can then recommend specific allocation changes that may be more appropriate than your current investment approach.
Use risk protection tools.
Changing your allocation is one way to reduce your potential risk levels. It’s not the only option though. You could also incorporate into your strategy retirement vehicles like fixed indexed annuities that reduce or eliminate market risk.
For example, there are a wide range of vehicles that allow for growth and interest accumulation based on market index returns, but without exposure to downside risk. You could use this option to eliminate risk on a portion of your allocation, thus reducing your overall risk and volatility exposure.
Ready to develop your 2020 investing strategy? Let’s talk about it. Contact us today at Bevan Wealth and Tax Strategies at 864-214-1108. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
Investment Advisory services offered through Change Path, LLC, an Investment Advisor. Bevan Wealth & Tax Strategies and Change Path, LLC are not affiliated.
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19523 – 2019/12/3