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Stock market at all-time highs; time to lock in some of the winnings?

Published: Aug. 25, 2020 at 7:31 AM EDT
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LEXINGTON, Ky. (WKYT) - The stock market continues to push higher as Americans adjust to the new normal during the pandemic. Airlines and hotels have seen a moderate uptick over the last few months and investors continue to bet big on continued recovery. For those wanting to see a nice return but question the stock market valuation, Josh Smith, independent wealth management advisor of Strategic Wealth Designers, says no matter what the stock market is doing, a financial portfolio must be positioned according to each individual investor’s situation.

“For those in or near retirement, putting safety nets in your financial portfolio is a must,” Smith says. “When you are nearing the distribution phase of your life and your portfolio’s life, you’ve got to make sure you are not going to outlive your money. Carrying too much risk in your portfolio in your latter years could change your lifestyle if the market saw a big drop -- and no one wants that.”

Determining what amount of money should be in what type of investment portfolio depends on multiple factors:

1. Your Age – Younger = Acceptable to have a greater risk. Nearing Retirement = a balanced portfolio that mitigates risk.

2. Your Income Streams – Those carrying large pensions like a career military person or someone who worked for the railroad would not need as much guaranteed as an investor without a pension

3. Your Investing Preference – Regardless if an investor has $250,000 or $2,500,000 saved for retirement, most do not like to lose money. The investor with $2.5 million can take more risk typically but it doesn’t mean they will want to. Knowing what an investor is comfortable losing if the market were to drop is critical.

Smith says one of the easiest ways to map out the right investment strategy in a customized way, is to simply follow the Rule of 100. Take 100 minus your age and that is the percentage of an investment portfolio that you can take a risk with.

“We see couples all the time in our office who are 65 and their financial portfolio is carrying 70% risk from the investments the financial advisor put them in,” Smith says. “That may have been fine when they were 30 but it’s dangerous for them now. Most people don’t even realize they aren’t following the Rule of 100. When they are in retirement, a big loss will hurt a lot more than a big gain will help. If you are retired, you don’t have time on your side to make up the losses.”

Building a financial plan based on the goals and objectives of the retiree is where every financial advisor should start. Smith says there’s always a small percentage of an investment portfolio that investors can ‘toy’ with. Maybe 5 or 10% but the other 90% needs to be professionally managed to help secure a safe and enjoyable retirement. To learn more about this financial news topic visit https://WKYT.com/MoneyMatters and if you have a financial planning question for Josh, send an email to Info@SWDgroup.com

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