May 2020
401(k) Allocation

There are trades this month, and we are dipping our toes into the hardest hit parts of the market – small and midsize companies. 

Are we there yet? Probably not. In the history of corrections, we typically find three phases: initial panic, then relief rally, then capitulation or a re-test of the lows. Is it different this time? Probably not. Yet markets have rallied off of optimism for a treatment, the potential to re-open phases of the economy and frankly, the sheer magnitude and speed of the financial relief provided by the federal government. Within bear markets we find bull rallies the likes of which we have experienced the past two weeks. 

The struggle with a 401K allocation is timing. Many plans do not allow for trading more frequently than once a month and some come with short term trading penalties, so we have directed this allocation with that in mind since we first developed the idea in 2011. I think we are in some unchartered waters here and in spite of current optimism and tools, we may still retest those lows – and unfortunately, that doesn’t always happen on the first of the month! So to that end, I am asking you – if you follow these allocations regularly – to let me know if you would like to be notified should we reach our risk-off trigger mid-month by replying to this email. I will create a special mailing just to those who are interested that will only get sent if we find a pain point based on our modeling. 

For everyone else, the past two months should have been a healthy test of your risk tolerance! In conversations with many of you, I have also felt the need to add another column that isn’t quite so extreme as Conservative, but is a slightly lower risk than Moderate, so we have added a Balanced category which, when fully invested is 50% stocks, 50% risk off. As always, please let us know if you need any assistance in rebalancing your 401K / 403B / 457 plan and if we haven’t created an allocation for you based on your own plans investment options, please let us know and we’ll be happy to create your own personal “decoder ring”! 

If you have questions, please contact us.

MARKET UPDATE
FINANCIAL PLANNING
COLLEGE AND TAX PLANNING
GRAPHIC OF THE MONTH

To download the May 2020 Newsletter: CLICK HERE

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