The market is going up or, perhaps, down. Is your first thought whether to buy or sell one or more of your investments? Or you just heard about an attractive new investment; should you sell one of your existing holdings and buy that instead? Maybe you just received a substantial cash inflow; would you want to put it to work in the market immediately? Often the gut reaction to market events, news, or funds coming in is to do something.
However, sometimes, not executing a trade is the best move you can make. A decision to not trade is, in fact, a crucial component of active management. When we are evaluating potential shifts in a client’s portfolio, there are several factors we examine and questions we ask, including, but not limited to:
- What is going on in the market; is it a long-term fundamental shift or short-term noise?
- For a short-term tactical move, do the potential benefits outweigh the tax and other costs associated with trading?
- Do we believe there is still significant upside to current holdings?
- If we are contemplating selling one position in favor of another, is the new one more attractive and do we believe it has more return potential than the one we are selling, after tax and other costs?
- If there is cash to invest, do we believe it is the right time to invest the cash or should we wait until we feel market conditions are appropriate?
- Perhaps most importantly, how does the trade we are considering affect a client’s overall asset allocation and portfolio in terms of risk and return?
Each decision we make to trade or not to trade is the result of in-depth, sophisticated analysis and is made by your portfolio manager, based on discussion and evaluation by our Investment Committee. We focus on building portfolios that achieve your goals for growth, income and risk management, with prudent diversification designed to reduce volatility in times of economic and market stress.