In our Ask an Advisor series, members of Grow’s Financial Advisor Panel answer your money questions each week. Today, CFP Mary Beth Storjohann, founder of Workable Wealth in San Diego, Calif., explains when it’s smart to shift your portfolio’s asset allocation.
Q: The recent stock market volatility is making me anxious. It’s down one day, then up the next. Should I consider shifting my portfolio to a more conservative asset allocation?
It’s natural to feel a little uneasy about major market swings. But if you initially set up a diversified portfolio with your long-term goals in mind—and those goals remain the same today—there’s no reason to change it because of short-term volatility. Instead, do your best to avoid watching the daily movements in your investment accounts, so you aren’t tempted to react based on your emotions.
Even if the recent volatility has you wondering if you don’t have the stomach for risk that you thought you did, I’d recommend thinking very carefully and, ideally, speaking with a professional before making any changes to your portfolio. That’s because shifting to a more conservative asset allocation (i.e., more bonds) will impact your long-term goals. Ask yourself, for example: Am I okay with retiring at 65 instead of 60? Or waiting longer to achieve my other goals? A portfolio that experiences less volatility typically sees fewer returns, as well, so adjust your expectations accordingly.
That said, if your financial goals have changed, shifting to a more conservative allocation may make more sense. But no matter what, make sure you’re checking in on your investments about every six to 12 months. This is your chance to rebalance, as gains and losses can throw your desired asset allocation—whatever that may be—out of whack.
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Grow Financial Advisor Panel participants are responsible for the content expressed and do not necessarily represent the views or opinions of Acorns Grow, Inc., Acorns Securities, LLC or Acorns Advisers, LLC. Content is provided on an informational basis and should not be construed as investment advice. Individual circumstances will vary. Please consult a financial advisor before acting on any opinions expressed. Participation in the panel is voluntary. Editing of advisor responses is for brevity and clarity; no editorial privilege is exercised.
November 7, 2016