2022 has not been a good year for stocks. As I write this, the four major indexes are all down for the year and down a lot. The S&P 500 is down -25%, the Dow -20%, Nasdaq -36% and MSCI All World Ex US is down -29% but even more shocking is the negative performance that bonds have produced in 2022. The Barclays US-Bond Aggregate is down -16%. Most people, believe bonds are reasonably safe and do not lose money or do not lose much money. You can see from this year, that is certainly not accurate.

While it has been a very difficult year for investors, it reminds me of our three bucket strategy we utilize for our clients. In the #1 bucket, known as short-term bucket, this is where you keep your money that you will need over the next 0-3 years. This bucket is cash or cash like instruments (money market or CD’s). This way, if the market is down, you pull your income need from bucket #1 and not forced to sell your other investment securities (in bucket #2 and #3) in a down market, allowing the market to rebound over the next 3 years to yield higher returns for you. The #2 bucket is the mid-term bucket. This is income need you will need in years 4-10 from now. This bucket generally has bonds and dividend paying stocks in them. Of course, this is much more aggressive than cash, but it offers higher yields and the opportunity to grow your money slowly overtime. The #3 bucket is for the long-term, 10 years and beyond. In this bucket, you have growth stocks and other alternative type investments. These tend to be much riskier, however, over time they often produce better returns than the other two buckets over time.

When you implement the bucket strategy, you add at least some emotional calmness in volatile times or when there is a financial hurricane going on. Panic or emotional selling is not wise for your financial portfolio, in fact it usually creates major issues down the road and decreases your chances of your money outliving you.

In closing, now is a good time to review all of your bank account(s) and the cash/money market positions you have with us to make sure your upcoming cash needs are met for the next few years. If you do not have enough cash in bucket #1, we may need to change some things. On the other hand, many of you may have too much money in bucket #1 and now is a great time to be moving the cash you don’t need over the next 3 years into buckets #2 and #3 since the price is much lower today. Realize, that in the short-term the prices may go lower than where they are today, but they will rebound eventually. Many of you may remember the old saying from EF Hutton, Buy Low (when the market is not good, and stocks are on sale) Sell High (when the market is doing great, and stocks are overpriced).

Spencer D. Neal, AIF®, C(k)P®

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