Wealth Protection Strategies for the Average Investor

Our panel of expert financial advisers tells you what to do with your portfolio in the post-Greenspan era

that probably will come back around. If you are an existing client [and] you already have your asset allocation percentages laid out, you would redirect money into things that happen to have been underperforming in the last couple of years. Redirect the money invested in energy into those underperforming assets.

Williams: Very good point. I would not, at this stage, recommend that anyone invest in the energy sector because it has had a good run. However, one of the focuses of my portfolio is to constantly rebalance: selling high and buying low and moving into sectors that have underperformed.

It’s very hard to get a client to pull money out of an asset class that is giving them a 30% or 40% return. That’s what they have to do. If you don’t have any losers in your portfolio, you have a very poorly designed portfolio.

Perry-Mason: I try to tell my clients that we need an exit strategy for once [a stock] gets to that certain amount. You don’t want to get greedy or [experience] what happened to [investors during] the tech wreck. But it is so difficult to get a client to rebalance and to say, ‘I want you to take [money out of stocks that] had a great run.’

Hinson: When you have markets where there is uncertainty and there is volatility, you have to have, in my view, a very, very specific buy strategy and a very specific sell strategy. I try to create portfolios that have all positive situations because we are constantly pruning. But we have certain [buy] parameters and we have certain sell parameters.

If an investment is not hitting the return numbers, I’m going to get rid of it. If a managed account or mutual fund is not performing up to the level of its expectations, I’m going to get rid of it. We believe in constantly re-evaluating, but when there is a lot of volatility, you have to be crystal clear as to how much pain you are willing to suffer on the downside. To the point on getting tremendous returns on the oil investments, once you hit that point it’s time to take those profits off the table, take the tax hit, and reinvest those [assets] into other things. But your strategy needs to be defined.

Williams: We always do what is called an investment policy statement for each client based on his or her goals and objectives. That’s a policy statement you build a portfolio around. Now, if that investment policy statement says that we are going to be moderate investors, then that means that we are going to have a certain percentage of our assets in certain asset classes.

If I say a client should have, based on his investment strategy, 20% in international, and the international sector gets up to 25% or more, we bring it back down to 20%. We will do a mandatory rebalancing, at least once a year, because we don’t want clients to get caught up into another tech wreck.

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