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Why Didn’t You Move Me to Cash?

We heard the above question from several clients as the stock market continued to sink in the first half of October.  They were hearing that other investment advisors were shifting out of stocks given the ‘correction’; that stocks were overvalued and its best to stay on the sideline until the turbulence passes.

Instead we looked to buy into US and foreign stocks with new cash flows to take advantage of the dip.  Soon after these conversations the market rallied with US stocks hitting record highs again to end the month.  Those advisors that moved their clients to cash would have needed to move back in to the market almost immediately if they didn’t want to be left behind.

While we will not get it right every time – and we certainly expect the market to continue to ebb and flow, predicting the future of the stock market is incredibly difficult.  Endeavoring to jump in and out of the market will be a loser’s game over time.  It has been proven time and again.  We therefore look to position a portfolio based on its goals and not based on what is happening in the market.  Establishing a target asset allocation and staying true to it instills discipline and removes emotion from the equation.  It also forces you to buy lower and sell higher; the goal of all investors.

So, next time you hear from friends that their advisors know which direction the market is going you can rest comfortably knowing you have a long term plan that won’t be changed week to week based on new ‘market predictions.’


Index Performance                                      Oct.      YTD    Trl 1 yr.        

US Stock (Russell 3000)                                    2.75%    9.90%    16.07%
Foreign Stock (FTSE AW ex US)                    -0.93%   -0.31%      0.73%
Total US Bond Mkt. (BarCap Aggregate)        0.98%    5.12%      4.14%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)     0.48%    1.21%      0.90%
Municipal Bonds (BarCap 1-10yr Muni)          0.44%   4.52%      4.14%
Cash (ML 3Month T-Bill)                                   0.00%   0.03%     0.05%




Raffa Wealth Management is an independent investment advisor providing nonprofit organizations, high net-worth investors, and qualified retirement plans with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at