Staying in Scoring Position

Staying in Scoring Position

| March 15, 2021

Athletes have a seemingly innate ability to maintain balance. It’s been fun to watch our local Utah Jazz put together a phenomenal start to the season. Watching them drive in the lane, contort their bodies to maintain balance and somehow stay in scoring position is nothing short of miraculous.

In a much less theatrical fashion, we do the same with investment strategies. When a portfolio is based on your risk tolerance and long-term goals, it is putting you into scoring position. Moving through the lane to get to scoring position isn’t met without resistance. Similarly, the market experiences periods of growth and loss, we must rebalance to maintain scoring position.

Like the basketball player who can be too aggressive and draw a charging foul, stocks can outperform in periods of growth. When this happens, a portfolio can become overweight to stocks, tilting it to a place where it’s taking too much risk.

Conversely, in periods of market loss when bonds become overweight, a rebalance can work like a defender giving us too much space in the lane. Rebalancing allows us to move funds from a conservative place to exploit the new opening created and take advantage of lower stock prices.

The best athletes get into scoring position with seemingly no emotion in the moment; years of diligent practice take over for an almost business-like finish at the rim. Often, it is only after the score is made you can often see the satisfaction or emotional celebration. This is another lesson we can learn from. Adhering to a systematic schedule of rebalancing, removes the emotional reaction to moves in the market and helps us keep our eye on the basket.

Navigating uncertain times can be stressful enough. A portfolio with an appropriate long-term risk profile is a great place to start and rebalancing along the way will help you stay in scoring position.

When you reach those goals, it’s okay to let out a roar and a fist pump and our team will be there to cheer on your victory dance.