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The year is halfway over. Here are three considerations to make sure your portfolio is on track

June 13, 2023 Published by

US Top News and Analysis 

Stocks’ big turnaround in 2023 may be enough to wipe away investors’ memory of last year’s big losses, but now is the best time to tidy up your portfolio and make sure it still meets your goals. Indeed, the S & P 500 and the Nasdaq Composite climbed to fresh 52-week highs on Tuesday, fueled by a consumer price index report showing that inflation continued to cool in May and investors’ hopes that the Federal Reserve will hold rates steady at its June meeting. .SPX .IXIC 1Y line The S & P 500 and the Nasdaq Composite have jumped in 2023, marking a notable turnaround from last year. The last thing investors may want to do now is prune their biggest winners and think deeply about their risk appetite – but that’s exactly what they should be doing. “With the families we serve, we have that mid-year checkup, and one of the main things we want to do is review their financial plan, along with their goals,” said Jorrell Bland, an associate wealth advisor at Mitlin Financial. “Look at your returns – where you are in this midpoint of the year?” he asked. “Hopefully we get those double-digit returns for year-end, but the markets are volatile.” 1. Rebalance your portfolio Tech’s remarkable bounce in 2023 could result in a significant portfolio tilt toward that sector – and an overconcentration that could hurt in the event there’s a downturn. That means it’s time to trim down a few of those oversized positions and make sure your asset allocation is properly reflecting your goals. To that effect, even Josh Brown, CEO of Ritholtz Wealth Management, recently cut his Nvidia stake by 25% as the semiconductor giant touched a $1 trillion valuation. Shares are up more than 170% in 2023. “It gapped higher, and I took the opportunity to just take something off the table because man, this is one for the ages, and I didn’t want to sit here in a reversal and not have done something,” he said on CNBC’s ” Halftime Report” on May 30. You can use the proceeds from your sales to snap up cheaper asset classes that might be underweight in your portfolio, including dividend-paying stocks. “Dividend payers have lagged this year behind the index,” said Tony Roth, chief investment officer of Wilmington Trust Investment Advisors. “So this is a good time, in my view, to pivot from those big growth names and toward higher quality, higher yielding names that haven’t participated in the rally and then add more of a defensive position in a portfolio.” Indeed, dividend-paying exchange traded funds have been overshadowed by the big run in tech that’s pushed the indexes higher. The JPMorgan Equity Premium Income ETF (JEPI) , a darling of income investors, is about flat this year, while Vanguard’s High Dividend Yield Index ETF (VYM) is down more than 1% in 2023, excluding reinvested dividends. 2. Revisit your fixed income holdings Wilmington Trust’s Roth said he maintains a “modest underweight to risky assets,” citing the stickiness of inflation. Instead, the firm is overweight on fixed income, particularly in investment grade municipal bonds for clients with taxable accounts. Roth likes the health care, hospital and educational areas, which he says is “where we’re seeing a lot of value in the municipal bond space.” On duration, a measurement of a bond’s sensitivity to interest rate changes, he said investors can go out three to five years on these munis. “We think we’ve seen most of the major shift in rates,” Roth added. The attraction of muni bonds is that the income isn’t subject to federal taxes, and you can avoid state income taxes if you live where the bond was issued. The tax savings makes them especially attractive to high income investors. 3. Check in with cash Cash is another asset that requires your attention, especially in an era when investors have a host of options of where keep those funds. “If it’s sitting in a checking account getting 0%, then the money is working for the bank and not for you,” said Jerrod Pearce, certified financial planner and wealth manager at Creative Planning. An array of banks, including Goldman Sachs ‘ Marcus, Bread Financial and Synchrony , are offering annual percentage yields exceeding 4% on their online savings accounts. A few institutions are offering rates of at least 5% on 12-month certificates of deposit, including Bread Financial and Citizens Financial Group . Just bear in mind that CDs will assess a penalty if you “break” the instrument before the term is up. Short-term Treasurys are also an attractive place to stash some cash. Consider that the three-month T-bill touts a yield of 5.2%, while the one-year Treasury has a rate exceeding 5.1%. Funds that you need in the near term can sit in Treasurys, but if you have a timeline of three to four years, you can build bond ladders to continue earning interest. Cash you don’t need for many years can go right back into your stock portfolio so you can keep ahead of inflation, Pearce said. “Make sure you have an appropriate amount of cash, and make sure you’re not sitting on an enormous pile of cash that’s doing nothing,” he added. -CNBC’s Michael Bloom contributed to this report.

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Darla Mercado, CFP®“Unrated” Bias Rating
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