Market Update & Rebalancing

We hope that you all enjoyed the long Memorial Day weekend!  Most importantly, we hope that you each took the time to remember the fallen and to thank a veteran for their service.

Market Update 

After some market volatility in the month of May, equity markets around the world ended with mostly positive gains last month.  One of the few exceptions was the technology heavy NASDAQ Index which finished slightly negative.

Stocks in general are having another strong year as economies around the world begin to reopen.  While the S&P 500 finished the month of May with year-to-date (YTD)  gains of approximately 12.61%, the biggest asset class winners so far this year have been U.S. small cap (DFSTX) which is up YTD by over 25%, U.S. Real Estate (DFREX) up over 20.00%, and U.S. Large Value (VVIAX) up over 18.00%.

Our strong recommendation to each of you is to maintain your 457(b) investment allocation based primarily on your investment time horizon and never based on what you think the market is going to do in the short term.  If your investment time horizon is longer than 10 years you generally want to hold only equities in your retirement account because stocks have historically outperformed bonds by a wide margin over 10-year time periods.

Why We Rebalance the DecisionPoint Portfolios

 Most of you have elected to use one or more of the DecisionPoint model portfolios inside your 457(b) account.   We will be rebalancing these portfolios over the next few weeks.  Here is what you need to know about rebalancing and why we think it will be beneficial to you over the long term:

Rebalancing is the process of selling some of what has been doing very well lately and buying some of what has not been doing as well.  It is the same principle as buying low and selling high.

There are no fees associated with this rebalancing.

Rebalancing, done consistently over time, has been shown to reduce long term risk and improve long term returns.

DecisionPoint uses specific parameters to determine when it is time to rebalance.  For example, the small cap funds which we hold in the portfolios are up over 25% since January 1st. We think now is a good time to sell a little small cap and buy other asset classes which are not up nearly as high.

You will see some trading activity when you log into your online 401(k) account.  All of this activity is associated with the rebalancing that we are doing behind the scenes.

You don’t have to do anything on your end.

As always, please reach out if we can be of assistance! 

- Your DecisionPoint Financial Planning Team -