Now is the Time to Review your Investment Allocation

By Matt Thornton, CFA® – Investment Advisor, Bryn Mawr Trust

The turn of the calendar represents an opportunity to thoughtfully review your investment portfolio as we look ahead to a busy year. A systematic approach should be leveraged to evaluate your long-term financial plan while harmonizing with a nearer term economic outlook. 

There are many things to consider when deciding on your investment allocation strategy including age, risk tolerance, goals and this may come as a surprise – the economy. Using these practical suggestions will help devise a plan best suited for your individual circumstance. 

Where am I on the road to achieving my financial goals?

The first question to ask is whether or not any of your financial goals have changed. From college funding, to caring for aging parents, to retiring with a comfortable level of income, each new year brings the opportunity to evaluate our goals. A strong financial plan will be designed around those goals and will adjust dynamically to how close we are to meeting them. In investment parlance, we focus on a strategic asset allocation that is a long-term level of risk needed to fulfill the goal. If you haven’t reviewed that strategic asset allocation in a few years this is a good starting place. Clarifying question: Does the amount of stock and bond allocation make sense for my goals?

How should I evaluate my portfolio?

Once a strategic asset allocation is reconfirmed or updated in light of changes to goals, the next step is to rebalance the portfolio. In 2023 the S&P 500 index was up 24%.1 The more growth heavy NASDAQ index was up 43%.2 And international stocks, as measured by the MSCI EAFE index, were up 18%.3 If an investor had started with an optimal portfolio of one third of the equity allocation invested into each of these three indices, the rebalancing would require trimming only the NASDAQ position to add to both S&P and EAFE. So even with strong performance across all three indices in nominal terms, outliers in a portion of your portfolio offer opportunity for rebalancing. Clarifying question: What were the leaders and laggards in my portfolio, and do they require rebalancing?

What can I change in anticipation of the year ahead?

Practitioners call this tactical asset allocation. It is an overlay to your strategic asset allocation whereby smaller changes to sub-asset classes can be done to express views. For instance, energy and healthcare are sectors that are expected to be key contributors to earnings growth in 2024. Knowing that the S&P has a 4% weighting to energy and 13% weighting to healthcare4, while the Nasdaq has a 0.5% weighting to energy and a 7% weighting to healthcare5, we can underwrite the decision to rebalance as both prudent from a risk management standpoint, and opportunistic as we’ll capture higher exposures to favored sectors. Clarifying question: Are there opportunities for adjustments to my portfolio based on the outlook for next year?

Start the new year off the right way by revisiting your goals and ensuring your investment allocation and objectives are aligned. Engaging with a Financial Advisor is a good place to begin if you are unsure of where to start. 

1,2,3 Koyfin, annual performance
4,5 Morningstar, sector weightings

Matthew Thornton is an Investment Advisor at Bryn Mawr Trust. He is responsible for tactical asset allocation, investment management, and economic commentary for highnet-worth individuals, families, and institutions. He joined Bryn Mawr Trust in 2022 having previously worked for over a decade at J.P. Morgan. His tenure there started in 2011 as an Operations Manager for J.P. Morgan’s Investment Bank. He transitioned in 2014 to J.P. Morgan’s Private Wealth Management division where he was a Portfolio Manager specializing in trust account investments. Matthew holds the Chartered Financial Analyst® designation. He also specializes in ESG Investing and earned the CFA Institute’s Certificate in ESG Investing. Matthew received his B.S. degree in Finance from Penn State University. He is a Board Member for The Casey Feldman Memorial Foundation, a Red Cross 3 Gallon Blood Donor, and serves as Judge of Elections in his local precinct. He also volunteers with Welcoming the Stranger as an assistant teacher in Bucks County.

This communication is provided by Bryn Mawr Trust for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this commentary is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in this report is derived from sources that Bryn Mawr Trust believes to be reliable; however, Bryn Mawr Trust does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.

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