At the Money: Using Volatility to Rebalance Portfolios
Mar 27, 2024
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Liz Ann Sonders, Chief Investment Strategist at Schwab, discusses using volatility to rebalance portfolios. She emphasizes 'add low, trim high.' Sonders highlights market swings, new highs, and the importance of taking advantage of volatility to adjust investments.
Volatility is the norm, use market swings to rebalance portfolios.
Customize investment strategies based on individual circumstances for long-term financial well-being.
Deep dives
Understanding Individual Investor Risk and Time Horizon
Individual investors, based on their unique situations and risk tolerance, should approach their portfolios differently. For instance, a 25-year-old thrill-seeker with a $10 million inheritance can take more risks, unlike a 75-year-old relying on investment income. This highlights the importance of customizing investment strategies to align with individual circumstances.
The Significance of Personal Financial Plans in Investing
Developing a personal financial plan is crucial for long-term financial well-being. It goes beyond just connecting time horizon with risk tolerance, as emotional risk tolerance can differ from financial risk tolerance. By establishing a comprehensive plan, investors can navigate the gap between perception and reality in their investment decisions.
Investor Behavior and Disciplined Investment Strategies
Investor behavior plays a vital role in long-term investment outcomes. Strategic asset allocation, diversification, and periodic rebalancing are key disciplines that shape successful investing. Avoiding market timing and focusing on disciplined processes over time are emphasized to counter short-term volatility and optimize performance.
The past few years have seen market swings wreak havoc with investor sentiment. But despite the volatility, markets have made new all-time highs. In this episode, Barry Ritholtz speaks to Liz Ann Sonders, Chief Investment Strategist and Managing Director at Schwab where she helps clients invest $8.5 Trillion in assets. Sonders observes that volatility is the norm, and investors should take advantage of swings to rebalance their portfolio. Or as she describes it, “add low, trim high.”