Shelter-in-Place Stock Market Update 1.8.2021 – How to adjust your portfolio for different markets.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

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Transcript

Hello, everybody, welcome to Friday. Really crazy week, obviously, with all kinds of things going on, turned out to be a very good week for the stock market as a whole and even better for our portfolios, which I’m really pleased with the S&P 500 did end up .55% into the positive today, which is great. But what I really want to talk about today is a question that’s been coming up. It’s just how do we manage the risk within the portfolio.

So let’s say that somebody is in a 60% stock model. And so we have 10 different models from 10 to 100% stock. And so what I have is a range of risk that I can essentially use around each model. And so sometimes we’ll be you know, right at the middle of that risk range, sometimes we’ll be at the top, sometimes be at the bottom. And so the question is, how do we decide where we are? So at the moment, we’re towards the top of that risk range, because this is one of the hottest stock markets I’ve ever seen. And that’s where you want to be, you want to be gaining as much as you can, because one of the ways to ensure that you, you know, have more money at the bottom in the next downturn is to have more money at the top.

And so that’s what we’re doing here. But let me show you how we adjust that risk and how we look for pieces that might be moving, and really kind of find the heartbeat of the market. And I’ll show you this, and let me let me share my screen here. Now, what we’ve got here is a spreadsheet of all of the holdings in the ETF kind of arena, there’s 2325 ETFs, I pulled this spreadsheet out of Morningstar, you know, has the name, the ticker symbol, the how much is in stock, how much is a bond, cash, and then I have returns and so this is 12 months, nine months, six months, three months, one month and one week.

And these are important, I’ll show you why. And then I have two risk measures, standard deviation and how much the ETF fell in the last year when the market went down. And then I have the actual downturn. So here’s the you know, the February-March downturn, the June downturn, the September and the October. And so all of these factor into this, but one of the strategies I use, for example, so I’ll go in here, and I’ll say, Okay, show me the highest to lowest rate of return for the last 12 months, and I will take a look at the top five here. Alright, so this is Clean Energy, Clean Energy, Genomic Revolution, Clean Energy, and Next Generation Internet, okay. And so I will put those five onto the spreadsheet, and every piece that I pull across here will get 3% and my little guide, now this is not the actual portfolio, what this is, is a guide for me to create the portfolio. And so then I’ll go to the next timeframe. And I will short that from highest to lowest and I’ll pull those top five.

And so there’s six timeframes, right times five, that’s 30. So each piece gets 30%. So that’s 90% of this hypothetical portfolio. So if I have different slices, and so I can slice the standard deviation at different places. And so here’s one, you know, fairly high risk slice that just again as a guide for me, and I color code these, so you can see this Invesco Solar was actually in there five out of the six times, so it gets a 15% weighting. And you can see, you know, Clean Energy is dominant. I mean, this is this is, again, all of the ETFs. All of these are Clean Energy pieces, that’s why it’s doing so well. Then we’ve got these ARK Components here, Genomic Revolution, which we own, Innovation, which we own, et cetera. But there’s some other interesting areas. I mean, Colombia, and Turkey has been, you know, hopping a little bit rare earth metals, uranium, cybersecurity, cannabis. And I always have a piece of Apple pretty much built into each one.

But I can I slice these at different risk levels. So here’s a lower risk level, kind of similar. Here’s a lower risk level now you can see Clean Energy drops back ARK jumps forward, there’s some battery technology. So I use these as guides for the different risk levels that I’m using in my portfolios. On I even have, here’s an unlimited bond. So you can see Emerging Markets bonds, High Yield bonds, International bonds, you can see what’s moving. So to answer the question of our going to adjust the portfolios, we look at what the market is telling us. So if all of a sudden in the one week period, you start to see all kinds of bonds being at the very top because the stock market is falling, or you start to see some inverse positions that go the opposite direction of the market, we’ll start to see those in our Guidepost Portfolio.

So there might be a big chunk of bond in here, because that’s starting to happen one week, one month, three months. And that’s how we can see what’s happening and we make adjustments. So we can go, you know, in this range of risk from kind of, you know, high to low within the range of that particular portfolio. So an 80% stock portfolio is going to have a different range, they will overlap, but it’ll obviously go higher on the high side, and not as low on the low side, for example. So really try to keep these little goalposts around every single one of the portfolios.

And that’s worked really well gives us some flexibility, you know, to kind of get a little bit more aggressive when things are doing well and a little bit more conservative when things aren’t. And that’s really been the process. But I think that spreadsheet in that process that I just showed you, is 35 years worth of experience to kind of come through with the concept that really, it’s been working really well as a guidepost to kind of show me what’s going on the heartbeat of the stock market and the bond market is really what I’m looking for there.

So anyway, I hope that helps and doesn’t confuse people too much. You know, sometimes they get into the weeds a little bit, but it is important to understand that we are working on this, we do have a process we do have some way of telling, you know what is happening and some way of making adjustments to the portfolios. So, look forward to seeing what’s going to happen next week. And definitely I will talk to you on Monday. Thank you very much.

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.