SONI Results – Associations – COVID-19 Impact

If your organization works with an adviser and you did not have a conversation about rebalancing (or making trades to bring your portfolio back in line with its target asset allocation) last year, then you missed an opportunity. 2020 highlighted the importance of outlining rebalancing procedures in your investment policies. Rebalancing involves taking advantage of market volatility by making trades to sell from asset classes that have risen in value and using the proceeds to buy into asset classes that have fallen. Think of the old adage “Buy Low, Sell High”. Outlining when to rebalance in your policies not only ensures that your portfolio’s risk profile is maintained, it also removes emotions and instills discipline into the decision making process for your investments.

For example, last year when stocks were down over 20% in mid-March it is human nature to believe they will continue to fall – which assumes there is further to go. Without a clear policy to drive action, which in this case would be to sell from fixed income and buy stocks while they are low, it is likely investors will miss the opportunity. The performance impact of rebalancing in Q1 2020 was significant. Not only did an overwhelming majority of organizations choose not to rebalance, those that neglected to rebalance reported lower performance by over 3% on average.

This report summarizes an informal study compiled by analyzing the survey results of nonprofit finance executives. The views expressed herein are opinions reflecting the best professional judgment of Raffa Investment Advisers (RIA). This report is for informational purposes only. Participant responses have not been verified or audited. The information contained has been gathered from sources we believe to be reliable, but we do not guarantee the accuracy or completeness of such information. Data analysis was performed by RIA. Nonprofits from our internal marketing database and a national external nonprofit database were solicited by direct email to participate in the SONI survey. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from RIA. Every participant did not answer every question in the survey. Percentages are based on number of participants that responded to each question, not total number of participants, unless otherwise indicated.