Sometimes the move is to do nothing image

Sometimes the Best Trade is…No Trade

Published: November 21, 2016

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.   

Important Disclosures

This material is provided for informational or educational purposes only and should not be construed as investment, accounting, tax or legal advice. Always consult a financial, tax and/or legal professional regarding your specific situation. This communication is not intended as a recommendation or as investment advice of any kind. It is not provided in a fiduciary capacity and may not be relied upon for or in connection with the making of investment decisions. Nothing herein constitutes or should be construed as an offering of advisory services or an offer to sell or a solicitation to buy any securities or a recommendation to invest in any specific investment strategy. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future returns. The views expressed herein are as of a particular point in time and are subject to change without notice. The information and opinions presented herein are general in nature and have been obtained from, or are based on, sources believed by Klingenstein Fields Advisors (“KF Advisors’) to be reliable, but KF Advisors makes no representation as to their accuracy or completeness. Although the information provided is carefully reviewed, KF Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided. KF Advisors represents two investment advisers registered with the Securities and Exchange Commission: Klingenstein, Fields & Co., L.P. and KF Group, LP. If you are a KF Advisors client, please remember that it remains your responsibility to advise KF Advisors, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.