Portfolio hazards can be a real issue for anyone investing in the stock market, especially those near retirement. That’s where Variance Drag Phantom Tax comes in. I’m Ed Butowsky, and I’m here to explain what I mean.
Have you ever been on a long road trip where everything was going smoothly until something suddenly went wrong?
Maybe a huge thunderstorm rolled in, making it difficult to see even a few feet ahead. Or perhaps there was an accident, causing traffic to back up for miles. These situations are out of our control and tough to predict, but we know they can happen.
The same thing applies to the risk in my investment portfolio. Many of us invest in a “standard portfolio,” which might include 60% equities and 40% bonds.
Some people might favor equities more heavily but maintain a high level of correlation among their investments. This makes us susceptible to encountering a “thunderstorm” or an “accident” in our portfolios. Just like with road hazards, we can’t predict when or how they will happen, but history has shown us they will. When they do, we need to be prepared.
Watch this week’s “Making Sense” with Ed Butowsky below to learn more about managing portfolio risk.
Investment Allocation and Selection: The risk in your portfolio stems from how you allocate and choose investments. These decisions should align with your investment timeline and goals.
Variance Drag Phantom Tax (VDPT): VDPT assesses the risk in your portfolio by comparing your rate of return with your standard deviation. Remember! It should be 0.8 or lower.
Impact of Volatility on Compounding: Frequent fluctuations in your portfolio disrupt compounding, potentially harming your long-term returns.
If you’d like to avoid portfolio hazards you may face today, visit my firm’s website at www.chapwoodinvestments.com to learn more, or feel free to contact me at the info below:
Ed Butowsky
Chapwood Investments, LLC is a SEC Registered Investment Advisory Firm. No mention of a particular security, index, derivative or other instruments in this material constitutes an opinion on suitability of any security. The information and data in this material were obtained from sources deemed reliable. Their accuracy and completeness are not guaranteed. At any given time, principals at Chapwood Investments, LLC may or may not have a financial interest in any or all of the securities or instruments discussed in this material. The guests appearing in material do not receive compensation or provide endorsements or testimonials. Past performance is not indicative of any future results.
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