The Bear Market & Your Portfolio

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Was your investment portfolio suitable for a BEAR market?

The stock market goes up and it goes down. It can be very painful when it goes down like this market has, but it IS what markets do.  Most investment advisors in this country will have suitably (appropriately) positioned their clients’ portfolios, taking into consideration such things as the client’s age and financial circumstances, assets (retirement accounts, other investments), whether the client is retired or working, and the client’s yearly earnings.  If your adviser did this, then the advisor and his or her firm have acted properly and appropriately, and you simply need to weather through this storm.

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Some brokers, however, do NOT suitably position their clients’ investments.  It IS unsuitable for brokers to position the investment portfolios of older individuals in risky investments, particularly those who are retired and/or unable to work and count on their investments to sustain them.  Those individuals should not be seeing their investment accounts going down at the same rate as the overall market notwithstanding anything the broker says.

There are a lot of variables to consider when assessing whether an investment portfolio was unsuitable.  For example, strong, proven, good dividend-paying companies are entirely appropriate for many portfolios of older investors, and yet many of those companies’ stocks have gone down dramatically with this Bear market.  A good example is Exxon Oil Company. Exxon is one of the strongest oil companies in the world, and Exxon stock has been held by thousands and thousands of mutual funds and retirement accounts for decades. Exxon stock has been particularly hard hit by the double whammy of the sharp decrease in oil prices (thanks in part to the gamesmanship between Russia and Saudi Arabia) and COVID-19.  But Exxon, like many of the other strong dividend-paying companies, will likely continue to pay the same dividend and will recover.  

Things to look out for in your investment portfolio 

  • Risky stocks: Have too many of the stocks in your account gone down more than the overall market
  • Overconcentration: Are lots of your stocks in one sector of the market?  For example, are a large percentage of the investments in your account in technology stocks, or transportation stocks, or hotel or restaurant stocks, oil and natural gas stocks, etc.?
  • Junk bonds: Junk bonds are typically issued by companies that are riskier than other companies and they typically have higher yields.  In uncertain markets they can lose their value dramatically. There are obviously many other factors to consider.

We need to emphasize that the vast majority of advisers position their clients’ investment portfolios suitably and appropriately.  Therefore, for the vast majority of investors, this dramatic decline in the market is simply something that happens from time to time.

If, however, you are concerned that something is not appropriate about your investments, we will examine your portfolio for you at no charge.

My Qualifications and Activities

I hold a Bachelor of Arts in Economics from Yale in 1975, and my law degree from Georgetown University School of Law in 1983. I attended the Hotchkiss School for high  school, after which I spent a year at Malvern College in England as an English Speaking Union Scholar.  I am licensed to practice law in Texas, the District of Columbia, Tennessee, and North Carolina, as well as being admitted to represent clients before FINRA in SEC regulated arbitration nationwide.

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