Rebalancing your portfolio consideration

I always advocate for folks to evaluate their portfolios at least twice a year.  I prefer them to rebalance them once a quarter.

Whether it is for investments for retirement, timed trading, or speculation it is simply a good thing to do.  This will let you know if you are on track with your goals.  The markets can be very dynamic and, therefore, your portfolio should be monitored.

One of the main things I always recommend for retirement investors is to have a large portion in an S&P 500 fund of some type.

We are about to enter into the worst 6 month period for the S&P, historically.

However we are coming into an interesting situation with the S&P at the end of the month ¡ª IF the month finishes negative.

The S&P after the first negative month following a ToY hat trick is a great chance to move more money into one of these funds.  

After a positive Turn of Year (DEC, JAN, FEB) the 25 times after a negative month has shown remarkable rallying.

For example, the next month is 21-4 with an average return of 2.54%.  The 3 months following is 20-5 with an average return of 4.1%.  The 6 months following is 22-3 with an average return of 8.58%.

One of the concerns is how the election year affects the S&P.  May-Oct 77.8% of the time it finishes higher with a return of 2.5%.  

Compare that to the first year of the election cycle ¡ª 66.7% positive with an average return of 2.8%; the second year ¡ª 52.6% with a negative return of -.1%; the third year ¡ª 63.2% with a return of 1.7%.

The concerns particular to this year are not really that concerning.

The sentiment rating for the market is still positive and on the rise.  

There was some concern about stagflation.  But as long as the inflation is more demand-driven than supply-driven there should be no real worries about that.  The concern stemmed from the miss on GDP growth and the beat on PCE inflation.  But this demand seems to be from the illegal immigration job growth and the increasingly better job market, in general.

There is also a good bit of earnings reports coming this week that may indicate how the month closes out.

So, this is something everyone might want to consider as they evaluate their portfolio and, hopefully, rebalance them.

If you are someone that is happy with your S&P fund, this should give you some peace if the months ahead seem a little down.

If you are someone that uses these ¡®trends¡¯ and might lower your amount of exposure to S&P for the ¡®down¡¯ months that are typically coming up and usually put that elsewhere, like energy and real estate ¡ª maybe you might want to reconsider and stick with the S&P.  

That way both of those groups will be ready when the ¡®usual¡¯ good months at the end of the year come.

There is always a case to be made for ¡®selling¡¯ the S&P at the high in April and buying at the low in September.  That is, of course, the normal yearly trend to ¡®maximize profits¡¯ for those types of speculators.  But, maybe this year it would be better to stick with the S&P.

If you are someone that likes to play these trends, there should be opportunities to make a nice bit of profit from this by going long in the next 1-3 months in the S&P.

I went into this in a great bit more detail elsewhere but this is the gist of it.

Just something to consider for anyone that might be interested.

Good Stuff RAIDERS..  

Personally, I don't get much into the statistics of the S&P500 on its seasonal or monthly performances, etc.  I'm a buy and hold kind of guy that rarely sells.  I look for opportunities to buy when others are fearful (kudos to Buffet), and I can go more than a year (like now) without finding any significant buying opportunity.   I look for pullbacks of at least 10% to get any interest, and those don't come around all that often , and I'm fine with that. 

I think your broader point on portfolio re-balancing is an important topic for people.  I think lots of folks that own a 401(k) don't ever re-balance their portfolio, and maybe (hopefully) they are in a target date fund if that is the case.  Personally, I track my (retirement & taxable) investments performance every 6 months, and log all the data into a spreadsheet .  I only re-balance once a year, and only if the performance deviates more than 5% from my target benchmark.  There are various schools of thought on this subject, but I am of the opinion that you should let your winners run a little, and if it deviates a little from the target during the year, ... no big deal. 

The s&p goes up more than it goes down but the gains are carried by the magic 7, of which I feel a substantial pullback will ensue at some point.  

I think diversification is key and you can do that by adding in some higher dividend payers, blended ETFs, and preferred stocks in solid companies with higher dividend yields, and you can get those preferreds at a super discount compared to par value. 

wells fargo

gladstone commercial

public storage

nustar energy

PFFA 

I really see value in preferreds.