REFOCUS, REVIEW
& REBUILD

Prepare for tomorrow. Recover with confidence.

Living through a pandemic requires resilience, planning and patience. The COVID-19 pandemic has changed how we work, learn, socialize and invest. To help contain the virus, public health experts say we must follow the ‘3 Ws’: wear a mask, wash your hands, watch your distance in public.

Help your clients to focus on what they can control amid the uncertainty. Clients can take a ‘three Rs’ approach to their portfolios: Refocus, Review and Rebuild.

STEP 1: REFOCUS

Performance of the S&P 500 Index

Performance of the S&P 500 Index Source: S&P 500, as of August 31, 2020

What just happened?

This winter, the S&P 500 suffered its fastest 30% decline since 1931. In just 31 days, one of the longest bull runs in history…was history. By mid-June, the markets had quietly recovered, but if anything’s certain right now it’s that more uncertainty is on the way

Take an honest look at your circumstances, goals and appetite for risk. Has anything changed?

A scarcity mindest is one of the side-effects of life under lockdown. The same instinct that compels people to horde hand sanitizer can compel investors to avoid risk.

Have an open conversation with your advisor about what’s changed in your situation and in the markets – and what those changes mean for your long-term plans.

STEP 2: REVIEW

Whether you rode out the downturn or waited on the tarmac, your portfolio may look different today than it did in January. Talk to your advisor about consolidating, substituting and complementing your holdings to help prepare for what’s next.

Together, these considerations will help you identify gaps in your portfolio, which can point the way to solutions that will help you rebuild.

STEP 3: REBUILD

A crisis often accelerates trends that were already just beneath the surface. Talk to your advisor about bolstering your portfolio with solutions that are well-positioned to benefit from the following prevailing themes:

Focus on the fundamentals of research and risk management to give investors a strong core of fixed income – with the flexibility to take advantage of new opportunities.

A solid core

Build a core fixed income strategy around high-quality government and corporate bonds.

Currency-Managed Global Exposure

Invest abroad for enhanced returns from yields and currencies while reducing exchange rate exposure.

Diversification

Take a multi-sector approach to help your clients benefit from the best yield opportunities while reducing volatility.

More Yield, Without More Risk

Increase income without adding significant risk.

Take another look at the foundation of your clients portfolios. A strong core of fixed income can help reduce drawdowns and provide your clients with stable returns.

Amidst the uncertainty, investors may be drawn to the resilience of high-quality and well-managed companies with solid balance sheets.

High-quality companies tend to regularly pay and grow dividends, increasing their return potential.

Average Annualized Return by Dividend Policy

30-Year Period Ending August 31, 2020
Average Annualized Return by Dividend Policy

It can be a challenge to increase quality while maintaining growth. An experienced manager with a dividend-focused approach can help.

Source of chart: Ned Davis Research Group, Inc., March 31, 2020. Indexes This chart represents the dividend-paying and non-dividend-paying stocks of the S&P 500 Index. The average annual total returns are calculated using monthly equal-weighed geometric averages of the total returns of all dividend-paying stocks and non-dividend-paying stocks. Returns do not reflect the deduction of fees or sales charges.

91% of investors want to have investments that can outperform the markets and 90% believe that risk management is important*. If your clients share these views, they may want to reduce exposure to passive or index-like products.

Popular stocks tend to make up an outsized portion of any benchmark. This is certainly true of the FAANG stocks today.

Historical Weights as a % of the MSCI World Index

As of August 31, 2020
Historical Weights as a % of the MSCI World Index

Take clients beyond the benchmarks. Skilled active managers can help navigate volatility while seeking areas of opportunity. 

*Franklin Templeton Global Investor Sentiment Survey 2018

Learn more. Talk to your advisor or call us at 1 (800) 387-0830.

INSIGHTS