The Investment Account: How does your account compare?
As the financial market progresses, the need for a well-thought-out investment strategy has become increasingly pronounced. Our allocation scheme, tailored in response to the nuanced economic indicators listed below, has successfully found equilibrium amid the potential opportunities and risks in this dynamic investment environment. Even in the era of AI-driven investments, financial markets remain unpredictable, underscoring the importance of a thoughtful and adaptable portfolio. As we review our allocation strategy, reflect on how it aligns with your current approach and the unique aspects of your financial journey. Remember, consulting with a financial professional offers personalized insights based on your specific financial situation and goals.
This allocation scheme is more than percentages, it’s a strategic move to lower the total risk of the portfolio compared to the market on a risk-adjusted basis. We achieved a balanced and diversified portfolio that aims to manage risk effectively while seeking returns aligned with our long-term financial goals. Your specific allocations should align with your risk tolerance, financial goals, and the evolving economic environment.
BMG Allocation Strategy
The above percentages are further split into their own subcategories:
Alternative Investments (Total: 10%)
Private Equity (4%): Allocate to private equity for potential higher returns over the long term.
Commodities (3%): Consider exposure to commodities for diversification.
Additional Alternative Investment (3%): Allocate the remaining 3% to another form of alternative investment (e.g., hedge funds, real assets).
Equity Allocation (Total: 65%)
Large-Cap Stocks (15%): Diversify across established large-cap companies.
Technology Sector (20%): Increase allocation to the technology sector due to the expected increase in technology spending.
Real Estate Investment Trusts (REITs) (10%): Maintain exposure to real estate.
Small-Cap Stocks (10%): Allocate to small-cap stocks for potential higher returns.
Additional Equity Subcategory (10%): Introduce a subcategory of Quality stocks or Dividend stocks
Fixed Income Allocation (Total: 25%)
Government Bonds (15%): Invest in government bonds for stability and income.
Corporate Bonds (10%): Allocate to corporate bonds.
Given the below economic indicators are estimates and change with the current status of the economy it is essential that monitoring and adjustments are proactive and ongoing to all investment accounts. Therefore be sure to perform:
Quarterly Review:
Continue regular reviews, considering economic indicators and adjusting allocations as needed.
Risk Management:
Given the potential risk of economic weakness, maintain a diversified portfolio with a mix of equities, fixed income, and alternative investments.
Cautious Approach:
Considering the LEI's signal of potential economic weakness, maintain a cautious approach, and be prepared to adjust the portfolio if recessionary risks materialize.
Current Indicators - Financial Rate & Confidence
| Indicator | Value |
|---|---|
| Interest Rates: 30 yr mortgage | 7.99% |
| 10-2 Year Treasury Yield Spread | -0.43% |
| Consumer Confidence Index (CCI) | 102.6 |
| Corporate Earnings Sentiment | Estimated to decline by 5% |
| Worldwide GDP Forecast | 2.6% growth next year |
| Housing Starts | 7.0% above the revised August estimate |
Current Indicators - Labor & Trade
| Indicator | Value |
|---|---|
| LEI | 6-month growth rate somewhat less negative |
| Labor Force Participation Rate | 62.70% |
| Unemployment Rate | 3.9% |
| Trade Deficit | $61.54 USD Billion in September |
| Technology Spending | Expected to increase to $5.1 trillion |
| Dollar Strength Forecast | Modest dollar strength forecasted by JPM Research |
Just as a well-balanced investment strategy can pave the way for financial success, the commitment to monitor and adjust is the key to sustaining and growing your wealth. Make informed decisions, stay vigilant, and let your investment journey be a reflection of your unique financial aspirations. At whichever stage you find yourself in [ debt mgmt., goal clarity, budgeting & saving or investment strategy] it is far more important to stay consistent with your goals than conforming to societal expectations.
This post can serve as a reminder that chasing yields or timing the market often lead to higher opportunity costs and larger than expected drawdowns. To illustrate, consider the following examples:
S&P 500 Index
$1,000 invested into the S&P 500 at the beginning of the 2023, today is worth around $1,190
$1,000 invested August 1st in the same year, today would be worth around $962.
As you navigate the dynamic landscape of financial decisions, remember to stay informed and let your unique financial aspirations guide your personal path. We align our allocations with the forecast of the economic outlook, emphasize sectors with growth potential (e.g. Technology) while considering the varying risk levels associated with each position.
So far these allocations have worked for us, year to date, reflecting our commitment to the pillars of BMG: Strength, Alliance & Longevity. As you continue on your financial journey, know that BMG is here to support you with the same level of strategic expertise, helping you navigate the complexities of the financial landscape and achieve your unique financial needs.
