March 30, 2020
We are now entering our third week of lockdown. I hope you are healthy and safe, and not suffering from too much cabin fever.
The good news is that our office continues to function at almost full capacity. We are able to provide all of our services. Some things just take a bit longer.
About a year ago we decided to allow dividends to accumulate in cash because we wanted to have some cash available to make opportunistic purchases for the next time the market dipped.
Now that different parts of the stock market are down between 20% and 30%, we feel this would be a good time to start reinvesting dividends again. We are in the process of implementing this change to give ourselves a small ability to “buy low.”
We are now also reviewing our target asset allocations compared to current allocations and considering when to rebalance Portfolios and bring them back to target.
This would entail selling bonds and buying stocks. There is no question in my mind that this is the right thing to do in the long term. There is also no question that this will increase short term volatility. So we will consider this on a case by case basis.
I remember back to September 12, 2001. CNBC asked me to come on the air to help “calm the markets.” When I was on air I mentioned John Templeton’s famous guidance “buy when there is blood in the streets.” “I know that sounds a little gruesome. Certainly, we want to be respectful of those that have been harmed. At the same time, I believe that 2001 will turn out to be the buying opportunity of the century.” The Dow was around 9000 at that point.
I have the tape. It is an old VHS. When I figure out how to convert it I will send it out for your viewing pleasure.
Ten or twenty years from today we will have a similar perspective.
All of that is a way of saying that in the not too distant future we will start rebalancing on a case by case basis.
Naturally, if you have any questions or concerns, please contact me.
Best Regards,
Kevin Ellman
CEO, CFP® Wealth Preservation Solutions
Personal Family Office / 360 Wealth Management