Michael E Weintraub, Esq. on Stocks Allocation

January 4, 2021

In the past, you might have heard about the best returns on stocks from a company that you have loved for years. Investing might even have been a recent recommendation when a few weeks ago someone told you that the stock market’s profits were impressive at the time. Many people are interested in investing in stocks at the moment, and rightfully so – the opportunities for returns on investments are big.

When people are young and have fewer assets, the stock investment can be a fun pastime. Even when one fails to make more money, one can learn to be successful. With maturity comes investment in stocks in portfolios. Looking at widely prevalent wealth management theory highlights that most people want to have their assets in stocks when they are young in order to track long-term appreciation. However, stocks naturally come with volatility. 

Michael E Weintraub Esq. on how volatility can wreak havoc

Some investors know the emotional toll of abruptly losing 10% or 50% of their wealth from volatility. Those who invest understand how this volatility impacts savings and investment strategies. But volatility can affect us even if investment disciplines are solid. You might want to ride out a 50% loss. However, Michael E Weintraub Esq. highlights how there might be a need to make money during a downturn. For instance, you might possess a $1 million stock. Even if it gets reduced to 50%, you can feel confident about bouncing back. However, if you lose your job and need to take out $100,000 to cover indefinite unemployment, things may be different. When the stock market is in a downturn, this is a reflection of how the economy is also in bad shape. If such a situation occurs, you have to make sure that your stock allocation is on track for your situation.

That being said, there is always a place and time to be aggressive in stocks! Despite all of the volatility, it is an excellent time to start investing in the stock market when you are young. Your portfolio will be relatively small, and you have more time to see growth. You need to withdraw from taxable accounts is less, which gives your investments time to recover.

The takeaway

All of us are at different stages in our careers and retirements. For those that are younger, their wealth has a chance to increase exponentially if they decide to place the majority of their assets in stocks. This strategy can work well. For that to happen, it is essential to find out a way to attain cash faster without using stock holdings. Whether people place their money in a security vault, use a family member’s credit line, or create an online savings account – all of these are great options.

It is not a good idea to follow all general guidelines on asset allocation depending solely on your age. Instead, you should think about the amount of cash you will have to withdraw against the stocks’ total value. That will enable you to manage your stocks better.

 

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