Christine Benz has been doing portfolio makeovers for several years. What were her key takeaways from Portfolio Makeover Week 2020? Here is what she had to share.
Retirement Among the most common makeover applicants are individuals nearing retirement and seeking a second opinion. Benz describes retirement planning as a "complicated business."
"The more I've focused on retirement planning, the more I've come to believe that most people should get another set of eyes on their plans before embarking on retirement," she says.
Asset Allocation Stocks had a great recovery in 2020, and many investors had very high equity weightings. This rally and investing habit emphasize to investors the importance of not putting all their eggs in the stock market basket. Although safer investments have very low yields, Benz reminds investors that they provide protection.
"I still think that most people, especially those who are getting close to retirement, should have an allocation to safe investments to protect them against potential equity market volatility," Benz says.
Foreign Stocks While Benz saw an abundance of equity, she also saw a lack of foreign stocks. Foreign stocks are projected to have better returns over the next decade, and Benz encourages investors of all ages to consider increasing their exposure.
Simplify and Diversify How can investors diversify without introducing more complexity to their portfolios? Benz has the solution: index funds.
"One other thing I typically do when I'm looking at a portfolio for someone who is close to or embarking on retirement is that I take some of the individual stocks out of the portfolio simply because even though some individual investors love their individual stocks, it just introduces complexity, it introduces more oversight obligations, and just increases the number of moving parts in the portfolio," she says.
For smaller accounts, Benz likes to suggest a target-date fund for hands-off, all-in-one diversification.
Positive Trends During her selection process, a couple of positive trends stood out to Benz. These included a greater embrace of index funds and a sharper focus on the long term.
"That was just kind of a feel-good thing with this year's set of portfolio makeovers, just to see that even though these are really challenging times, people are focusing on the future and focusing on better days ahead," Benz says.