Portfolio Rebalancing: What? Why? When?
Have you ever received a Raymond James trade confirmation (or several), and quietly wondered what it was for? It was probably the result of an action I took on your behalf. My name is Jessie Stirling, and I am an Investment Analyst and Wealth Advisor here at Stephens Wealth Management Group. In addition to serving on our Investment Committee and advising clients, I am also the primary Portfolio Implementation Manager for the team—that is, the person in charge of trading your accounts once we have analyzed them. As we gear up for summer, I will be rebalancing your portfolios to make sure that they are still on target with your investment goals. Before you receive your influx of trade confirmations, we want to provide you with a little insight into what goes on behind the scenes, as well as a few key reasons why rebalancing is so important.
Buy Low, Sell High
You may have heard this age-old adage—this is the crux of what rebalancing is all about. As your accounts grow and change, some of your investments will increase in value faster than others. We strive to keep you diversified so that we aren’t trying 
to predict which investments will be the short-term “winners,” as that tends to change drastically from year-to-year. As shown in the image to the right from Napkin Finance, after years of compounding, an account that is not regularly rebalanced can look vastly different than what we were originally trying to target, oftentimes transforming your money into a riskier portfolio than you may be comfortable with. To keep you aligned with your goals, we will cut back on some of the funds that have outgrown their position and reallocate that money
to some of the lesser performers—which sounds counterintuitive, but those areas may provide more cushion or potential as the market tide turns. Plus, don’t we all prefer to buy things when they go on sale?
Stay Current with Market Trends
One of the most important components of a long-term investment strategy is to avoid emotional investing—that is, stay the course even when the markets are volatile and avoid trying to “time the market.” With that in mind, our Investment Committee follows and incorporates economic trends to strategically manage your nest eggs while keeping you invested appropriately. We start with a macroeconomic view, looking at opportunities across U.S. versus international stock markets, interest rate and inflation trends, and many other details so that we can navigate these waters on your behalf while maintaining a well-diversified portfolio. As fiduciaries, we also monitor the fund managers that we use and strive to find the best-fit fund to meet our clients’ needs. When we see an opportunity to make a change, we will update our investment strategy and rebalance our clients’ accounts to reflect that change.
Manage Taxable Gains (and Losses)
The tax management side of rebalancing is two-fold—we try to be prudent when trimming your gains, and harvest losses when we can to help offset those gains. In non-retirement/non-tax qualified accounts, you are required to pay a capital gains tax on any investment growth that you have earned on a position once it is sold (aka realized). When we look to rebalance these “winners” back to target, we review and account for potential capital gains tax. We aren’t always able to avoid capital gains completely (and investment gains, in general, are a positive thing), but we will adjust our trades where possible to minimize your tax liability.
On the other side of that, we also engage in Tax Loss Harvesting—when one of your investments has lost money, we will sometimes sell it to realize the loss. That way, when you have capital gains, these losses can count against the gains to minimize your tax responsibility (you can also carry them forward to use in future years). When we take these losses, we will typically invest the proceeds in something similar for 30 days, and then buy back the original fund. That way you are still invested while making the most of a negative market. This was especially important in a year such as last year when both stock and bond markets were down.
Actively Manage Employer Retirement Accounts
Outside of Raymond James, our team now manages external retirement accounts (such as 401(k) and 403(b) plans) via a platform called Pontera. With this tool, we can manage your retirement account by choosing your investment options, implementing strategies on your behalf, and monitoring changes within your plan, so you can maintain a rebalanced portfolio based on your Investment Policy Statement without having to do the heavy lifting. Rebalancing is a key part of helping us keep these accounts aligned with both our overall investment philosophy and your long-term goals. To learn more about Pontera, or any of our other resources available, please visit our website or reach out to your Advisor. – Jessie Stirling
Pension & Buy-Outs – Critical Considerations
Are you or someone you know faced with a decision around whether to take your pension or buy-out in a lump-sum or through periodic annuity payments? If so, you probably know it is a complicated decision.
- How long do you think you’ll live?
- Does the plan allow for your spouse or heir(s) to receive payment if you die?
- What is your tax situation and what will it be in the future?
- How comfortable are you with market ups and downs?
- How do the options impact your estate plan, beneficiaries, and gifting expectations?
There is much to consider, and we hope this podcast will help you better understand your options. Please reach out to talk through your options with a SWMG financial advisor.
Listen to the podcast with Sherri Stephens and Jill Carr:
Resources to Navigate the Retirement Years
When my dad got sick, my family worked hard to navigate his care in the best possible way. Having no previous experience as caregivers, it was truly a fish-out-of-water situation. We had to learn how to be his health care advocates, and sometimes it left
As a financial planning firm, we work through conversations around every facet of planning: navigating care, supporting conversations around quality of life, and financial implications. Serving as our client’s center-point, we’re also able to leverage Raymond James’ longevity resources. Thoughtfully cultivated, these third-party services help navigate the retirment phase in both a purposeful and personal manner. Thriving in retirement is unique to every person, and the below services are available when additional care is needed:
- Medicare Planning
- Fraud Monitoring Protection
- Identity Theft Prevention
- Home Health Care
- Aging in Place
- Caregiving Resources
- Senior Living Placement
There’s much to consider when it comes to how you will live in your retirement years – from selecting the right Medicare plan, to finding a ride to the grocery store, or like in the case of my dad the possibility of a health episode. A life-centered and collaborative approach to retirement planning is how we live our firm’s motto every day, “Leave Nothing to Chance”.
While thinking through your healthcare, wellness, and long-term quality of life, our team is here to provide resources and support. Please use the links below to learn more about our longevity resources.
Longevity Planning Solutions:
EverSafe – help protect your money, credit, and identity by monitoring your bank and investment accounts, credit cards and credit reports for signs of suspicious activity.
Broadspire Care Management – supports those caring for loved ones who are aging or disabled and helps address the challenges and taking on responsibilities such as interviewing and screening in-home caregivers, coordinating medical visits and planning outings.
ClearMatch – work with a licensed agent who can provide unbiased service to help you choose a plan that aligns with your health and financial need.
PinnacleCare – healthcare concierge service that can advocate for you in the case of a major medical issue
If you would like to learn more about Longevity Planning Solutions, please let us know at info@stephenswmg.com.
Expecting a New Baby or Grandchild?
Congratulations from all of us at Stephens Wealth Management Group. During exciting times like these it is also important to think about how this new addition impacts your money, wealth, and estate planning.
Here are 8 planning ideas that we encourage you to consider:
- Essential Paperwork: File for key documents, including
a birth certificate and Social Security number - Beneficiaries: Update your beneficiary designations in key accounts (e.g., insurance, retirement, investments)
- Insurance: Enroll the child in healthcare plans, refine or consider starting Life and Disability Insurance
- College Savings: Costs are high and rising fast — as soon as possible, start saving and investing, leveraging one or several of the many tax-advantaged programs available to you
- Retirement Savings: Continue to plan and invest for your own retirement, maximizing all tax-advantaged and employer-assisted opportunities available to you
- Trust & Estate: Create or refine your Will, name a legal guardian for your child(ren), establish Medical and Financial Powers of Attorney, and explore potential Trust & Estate wealth protection and transfer strategies
- Taxes: Work with your tax advisor to maximize potential child-related tax breaks that may be available to you
- HSA / FSA: Maximize potentially “triple tax advantaged” contributions to HSAs (Health Spending Accounts), when available; fully fund and leverage potentially available DCFSAs (Dependent Care Flexible Savings Accounts).
As always, if you have any questions regarding these topics, our advisors are ready to help.
My Learning Ledger – Financial Management Tool for Kids
We have a great book for children (ages 5 – 12) to use as they learn the fundamentals of managing money. It teaches kids how to manage their allowance, 
as well as the meaning of basic banking terms and how to use simple math to support their money management system. There are several interactive activities kids can do in the Learning Ledger. Here are some of the key lessons’ children will take away:
Preschool: Connection between money and things
Kindergarteners: Counting money
First Graders: Identify connection between money and work
Second Graders: Making spending decisions
Third Graders: Making a plan, start a budget
Fourth Graders: Investing your money for future wants/needs
Fifth Graders: Family income (careers)
Sixth Graders: Mixed economies
Seventh Graders: Types of incomes (hourly, salary, commission, etc.)
If you would like a Learning Ledger to give to a special child in your life, please let us know at info@stephenswmg.com. Please include who the Learning Ledger is for and their address, if it is not your own.
*Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Stephens Consulting, LLC, doing business as Stephens Wealth Management Group (SWMG), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Stephens Consulting. Please remember that if you are a SWMG client, it remains your responsibility to advise us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. SWMG is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of SWMG’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Links are being provided for information purposes only. SWMG is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors. SWMG is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.
Please Note: Stephens Wealth Management Group does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to SWMG’s website or newsletter or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users should be guided accordingly.
The Three Key Principles of Planning for Retirement