An Update from Nabity-Jensen Investment Management

March 16, 2020 – We are living through an unprecedented time when many areas of our everyday lives have been affected by the Coronavirus. The outcome of the virus is difficult to predict, and financial markets hate such uncertainty. We at Nabity-Jensen are proactively working to ensure the best outcome for your portfolio, and wanted to take the opportunity to share a few reminders during this season.
Know that not all market activity is the result of well thought out investment management.
The largest swings in the market are caused by a variety of players participating in the stock and bond market for purposes unrelated to strategic portfolio management. When markets rise or fall 10% in a day, as happened this past week, it is not primarily a result of portfolio management decisions. More likely, these large swings both up and down are a result of activities such as short-term speculators having to close out bets, computer-programmed trading and forced liquidations, each exaggerating market moves. Strategic long-term portfolio management does not attempt short-term tactical moves amid this type of irrational market activity.
We have planned ahead for times like this.
In managing investments, we build portfolios that consider potential market swings. As you know, working with you we have set an investment strategy for each account we manage. That long-term investment policy is carefully thought out ahead of time. As a result, we do not have to react to headlines in times like these. Lower risk portfolios, or portfolios from which an income stream is needed, are built with smaller allocations to stocks and larger allocations to bonds and cash. This lowers overall risk and allows for needed cash flow without having to sell stocks at depressed  prices.
We are proactively managing your account during this volatile period.
Over the past few days, we have reviewed your current stock, bond, and cash positions, and we will continue to do so as the markets reprice and affect your portfolios. In addition to having the appropriate risk and return built into portfolios from the start, we take advantage of over-sold markets to add to stock allocations at attractive prices. There are two primary ways we do this. The first is investing cash into stocks while prices are low. The second is rebalancing portfolios to target allocations, adjusting for the drop in stock prices and rise in bonds. We have begun this process.  Where appropriate, we are selling overweight bond allocations and adding to underweight stocks, as well as investing cash that was earmarked for stocks. When significant shifts are needed in portfolios, we implement this change incrementally, rather than a sudden shift at one time.
Let’s stay focused on the objective.
We know that making short-term predictions about the virus or the markets is unwise. Our focus will continue to be on the intermediate and long term which is more relevant to your investment goals. The virus will run its course, the economy will recover, and markets will anticipate these developments typically weeks and months ahead of the economy.
Our priority will always remain seeing you achieve your long-term goals. We are actively working towards this end and will make thoughtful adjustments to your portfolio as needed. We wish you and your family peace and health during this time, and we are here for you as a resource. Please do not hesitate to reach out with any questions.