HB Perspective on Taking Action in Times of Volatility

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By Ross Bramwell


As the U.S. implements measures to “flatten the curve” of new cases, the economy is quickly feeling the impact of the resulting economic stoppage. We expect more fiscal and monetary response from the federal government in its attempt to bridge the gap during this downturn for individuals and businesses. Headlines in China have begun to reflect some progress in its recovery, such as today when it announced no new mainland cases for the first time. However, here in the U.S., upcoming unemployment claims and headlines of new cases will continue to reflect the growing economic pain for individuals and businesses. The news you read or hear will likely get worse before it gets better, although we continue to have hope for the progress of drug trials that could help battle the virus even sooner than a vaccine.

We expect these headlines to maintain the historic volatility we have experienced this month. As we continue to monitor and manage your portfolios, we want to explain some of the potential activity that may have occurred, or may occur, in your accounts. These include rebalancing, tax-loss harvesting, and potentially increasing our target allocation to stocks.

  • Rebalancing means adjusting your current holdings back to their original target allocations — that is, buying and selling stocks or bonds to maintain your established asset allocation. It’s important to maintain your asset allocation because it keeps your tolerance for risk at the most comfortable level. Currently, this most likely means selling bonds and buying stocks. Rebalancing allows clients to buy stocks at cheaper levels without having to time the market. These moves are typically incremental moves within the portfolio to bring the portfolio back to its target allocation.
  • Tax-loss harvesting is the practice of selling a security that has experienced a loss. The strategy allows you to sell investments that are down, replace them with reasonably similar investments, and then offset realized investment gains with those losses. The goal is to keep market exposure constant and to have potential tax savings for the tax return.
  • Increasing the target stock allocation would potentially occur when stock levels reach a determined “cheap” level. This would not imply an investor is calling a bottom to the market, as markets could ultimately move lower. This again would be an incremental move taken with a longer-view perspective. For the long-term investor that has liquidity available, buying at lower valuation levels has historically lead to improved portfolio returns over longer time periods. This trade could be made from cash already available, or by selling bonds in advance.

If you have further questions about these tools within your portfolio, please contact a member of your service team.

Disclosures: The information reflects Homrich Berg’s views, opinions and analyses as of March 19, 2020. The information is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any investment product. The information does not represent legal, tax, accounting or investment advice; recipients should consult their respective advisors regarding such matters. Certain of the information herein is based on third party sources believed to be reliable but which have not been independently verified. Past performance is not a guarantee or indicator of future results; inherent in any investment is the risk of loss.



Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients.