On Saturday, the bull market officially passed the 10-year mark. Now is a good time for investors to review their portfolios and rebalance holdings, adjust for risk or diversify into alternatives, if they haven’t already, says Tim Clift, chief investment strategist of Envestnet.
One example, Clift notes, is if someone had a buy-and-hold 60/40 portfolio at the beginning of the bull market in 2009 and hadn’t touched it; with the quadrupling of the market, it would now be about an 85/15 mix.
“If you’re not paying attention, you’ve just taken on an enormous amount of risk,” Clift told ThinkAdvisor. “The idea is you should have a more formal structure for rebalancing, whether it’s quarterly or annually, and take a long look at the allocation and make sure it’s where you want it to be. Look at your risk tolerance, your time horizon, and your goals overall.”
Rebalancing also may be needed due to life changes, for example, a divorce, an inheritance or even a child going to college, he says.
But especially with the bull market turning 10 years old, he urges caution. “It’s clearly not the beginning or the middle, it’s just where it’s going to end, and we don’t know if that will be in the few months or in the next year or two.”
He highly recommends taking “gains off the table” that may have been made through the market rally. They might be leaving your portfolio “too exposed.”
Also, liquid alternatives can protect downside risk or reduce downside exposure, or even do well when markets are falling, and are good ways to diversify a portfolio at this juncture, he says.