Though it seems like yesterday to some of us, the Dotcom bubble’s bursting, and the ensuing market decline began over 20 years ago. The Dotcom burst in 2000, and the ensuing bear market lasted into 2002; the market fallout was exacerbated by the tragic events of 9/11 the following year.
Much of the stock market’s strength in 2020 was tied to tech stocks, especially those that supported the stay-at-home dynamics of the COVID-19 pandemic. Are we looking at a repeat of the Dotcom Bubble and another market crash based on this?
Will the stock market crash?
Spoiler alert on this question; we have no clue, and neither does anyone else. Many factors are driving the gains in the markets that have largely continued into 2021. There are many experts with opinions on the markets’ future direction; we are not among them.
However, there are some indicators such as astronomical valuations; off the chart record-breaking IPO valuations, meme investing instigated crowd investing by ill-educated traders, and the list goes on. While the actors and implements may differ, the dynamic is still the same – heady times in what seems to be a never-ending bull run.
As an RIA, you are not in the business of predicting the markets’ future. Rather, the focus is ensuring your clients are properly invested based on their long-term goals, risk tolerance, and investing time horizon.
Asset allocation and rebalancing
For most RIAs, asset allocation is one of the most critical aspects in designing an investment strategy for their clients. Asset allocation helps balance the risk/reward tradeoff in client portfolios, aligning their investments with their overall financial plan.
Closely aligning with a client’s asset allocation to periodically rebalance their portfolio back to their target asset allocation is essential. As markets move in one direction or another, a client’s portfolio will invariably need to be rebalanced. Failing to do this exposes any client to risk that can derail the financial planning you’ve done for them.
In recalling the market decline of 2000-2002, different equity asset classes performed quite differently, making portfolio rebalancing even more critical during this time period.
This is where an integrated solution like AdvisorPeak can shine. Your clients likely hold a variety of securities across several accounts. These may include taxable accounts, a 401(k), IRAs, and perhaps others.
AdvisorPeak’s system of alerts and seamless integrations with most portfolio management software helps guide your clients through whatever the markets have in store. AdvisorPeak rebalances portfolios with various securities, including individual stocks and bonds, ETFs, mutual funds, and various alternative assets and private placements.
While no one can predict what the markets will do next, clients expect their investments to be managed with an eye towards mitigating downside risk. Let AdvisorPeak help you trade and rebalance to stay ahead of market corrections.