3 Ways to “Trump Proof“ Your Portfolio

Trump Proof Your Portfolio

To paraphrase Forrest Gump, the Donald Trump presidency seems to be like a box of chocolates, you never know what you are going to get! But with the stock market recording ever-new highs, it’s time to get going.  Protecting yourself means, you have to accept there will be surprises and surprises sometimes can be humbling.

Having made this disclaimer, lets start with a few obvious things.  As evidenced by the record high price of the S&P 500***, investor confidence appears to be brimming that the President’s pro business policies will be successful.  Of course, why else would the market be at these levels?  But, there is absolutely no guarantee this will happen either in whole or in part.

We began by observing how investors are abnormally calm.  Look at the markets volatility index or VIX and you will find a near 45% drop in the index since just before last November’s election. In fact, the index is near a 10 year low.**  This doesn’t make sense to me.  With the markets setting new records, investors are naturally entitled to be more nervous.

If there was serious doubt about President Trump’s policies or if there were any believers in the medias image of crazed despot, the VIX would be fluttering well above 20 rather than closer to 10-12 where it has been hovering lately. During the 2008 financial crisis, the VIX hit 60.**

vix

Record highs in stock prices*** and record lows in volatility **are signals that professionals watch closely to guide their strategy. We don’t know what’s coming next with the markets or with Trump, so here are 3 actions you should be taking with your portfolio right now.

  1. Make sure you have the right asset allocation for your risk tolerance.

  2. Make sure the investments in your portfolio are non-correlated.

  3. Make sure you’ve tested your portfolio under different Monte Carlo simulations to maximize the mathematical probability of success in retirement.

If you haven’t yet addressed these key issues, then you need to take action immediately.  If you don’t want your portfolio to transform into an unwanted box of chocolate surprises, then schedule a phone session with CrossPoint Wealth here http://meetme.so/crosspointwealth

 

References

* VIX Chart courtesy of CME Group

http://www.cboe.com/delayedquote/advanced-charts?

** Source: The CME Group

http://www.cboe.com/delayedquote/advanced-charts?ticker=VIX

***http://www.marketwatch.com/investing/index/spx/charts