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When the Market is Up We Still Have Work to Do

7 years ago

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We are pleased to say that we have had yet another positive year of returns so far in 2017. And while that is good news for most, it doesn’t mean we can just sit back – there is still work to do. Three key things come to mind that advisors and clients should be actively monitoring. As 2017 is the 9th year of this bull market, it could make these three things even more important – especially if you have not done them before.

1. Rebalance your portfolio
If you began in 2009 with a portfolio at 60 percent stocks and 40 percent bonds, you would now have more than 80 percent in stock without any rebalancing. My guess is that it is probably not your intention to have that much equity risk, which makes it imperative that you rebalance your portfolio. The gains that you have made will not last forever and making sure that your portfolio is at your intended risk tolerance should be at the top of your to do list.

2. Know that the same assets could stop outperforming
Different asset classes may not usually perform well at the same time. For example, during the last five years growth stocks have significantly outperformed value stocks while stocks here in the US have done much better than ones that domicile internationally over that same time period. Looking toward the future, consider having a conversation about buying the asset classes that have underperformed. It could lead to outperformance over the next five years.

3. Talk to your advisor about keeping gains
Making money in your investments is always fun to watch, but keeping those gains is the real goal – especially for those nearing retirement or already in retirement. There is a possibility that you can’t afford to give those gains back, as your income need is now attached to these new, higher values. Talk to your advisor about ways to make sure that your gains will remain. This is where our Cabana models can play a role. Our algorithm was designed to reduce the risk of loss due to market decline, while still obtaining a competitive return.

-Adam Smith, Financial Advisor

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Information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.

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Cabana Asset Management (“CAM”) is a U.S. Securities and Exchange Commission (SEC) Registered Investment Advisor (RIA) with headquarters in Fayetteville, AR. CAM is in compliance with the current registration and/or notice filing requirements imposed upon SEC registered investment advisors by those states in which CAM maintains clients. CAM may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Further written disclosure information contained in SEC form ADV Part II, including registration status, fees, and services, is available upon written request.

All performance returns are presented net-of-fees and include the reinvestment of dividends and capital gains. Benchmark comparisons are presented gross-of-fees.

Past performance may not be indicative of future returns. No current or prospective client should assume that the future performance of any specific investment or strategy will be profitable or equal to past performance levels.

All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client.

Historical performance results for investment indexes and/or categories typically do not show the impact of transaction and/or custodial charges or the deduction of an advisory fee, which may decrease historical performance results. There can be no assurances that a strategy will match or exceed its benchmark.

Some performance returns do not represent actual trading using client assets but were achieved through retroactive application of a model designed with the benefit of hindsight. Model returns have inherent limitations. Specifically, these returns do not represent actual trading and may not reflect the impact of material economic and market factors on the adviser’s decision-making if the adviser had actually managed the client’s money during this time frame.

Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. There are no assurances that a portfolio will match or exceed any particular benchmark.

Cabana LLC manages assets on multiple custodial platforms. Performance results may vary based upon differences in associated costs and asset availability within the Cabana Model.

Disclaimers

January 17, 2024

This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. This material may only be distributed in its original format and may not be altered or reproduced without the prior written consent of Cabana. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.  

“CARA” is Cabana’s Cyclical Asset Reallocation Algorithm. Scenes assigned as per the judgment of The Cabana Group. Scene names and number of scenes have changed over time in an effort to obtain efficiencies and provide clarity of investment objective. 

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.  

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV Part 2A or Form CRS. A copy of which is available upon request or online at www.adviserinfo.sec.gov/. 

Past performance is no guarantee of future results. All investment strategies have different degrees of risk and the corresponding potential for profit or loss. Asset allocation and diversification will not necessarily improve returns and cannot eliminate the risk of investment losses. “Target Drawdown” is merely a descriptive term used to describe the general strategy and objective of the portfolio, it is not a guarantee, nor should it be construed to suggest safety or protection from loss. There is no guarantee that portfolio performance will remain consistent with the targeted drawdown parameter. While risk tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account and there is no guarantee that Cabana’s strategies will be suitable for any investor. Investors and advisors should not simply rely on the name of any portfolio to determine what is suitable. It is the responsibility of investment advisors to determine what is suitable for their clients. Cabana manages assets on multiple custodial platforms. Performance results for specific investors will vary based upon differences in associated costs and asset availability.  

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All recommendations made in the prior 12 months are available upon request. Cabana’s allocation history is available here. For additional information regarding our services, including performance disclosures and award methodology, please visit https://thecabanagroup.com/disclaimers/. 

Commonly used index/benchmark definitions:  

All indices and categories are unmanaged and an individual cannot invest directly in an index or category. Index returns do not include fees or expenses. Benchmark indices will likely materially differ from Cabana’s portfolio strategies. Detailed information as to how the returns are calculated can be obtained online from the following link: https://thecabanagroup.com/disclaimers/performance-reporting-methodology/. 

Morningstar’s Moderate Target Risk index  follows a moderate equity risk preference and is based on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company.  

Morningstar’s Tactical Allocation category includes portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments. These portfolios have material shifts across equity regions, and bond sectors on a frequent basis. 

The S&P 500 Index is a market-capitalization weighted stock market index of 500 widely held large-cap stocks often used as a proxy for the U.S. stock market.  

The Russell 2000 and 3000 indices are market-capitalization weighted stock market indices that include, respectively, 2000 and 3000 of the most widely-held stocks and are often used as proxies for the U.S. stock market. 

The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq