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Were You Properly Allocated Before the Recent Downturn?

When the market gets rough and recession fears spike, investors may believe losses are inevitable. While this can be true, especially in the recent market downturn, there are steps you and your broker or advisor can take to properly allocate your investment portfolio to best position your finances to survive the downturn. While losses are likely, they can be mitigated by a smart investment strategy that properly considers the risks. If your account is not suitably invested, but has too much embedded risk, it is likely that the losses you suffer during a downturn will exceed your risk tolerance. Changing the portfolio risk and allocation is a must, but it may be too little, too late.

If you’re experiencing outsized losses, your advisor may have failed to recommend suitable investments to prepare you for this downturn. Assess your portfolio for some common investment missteps. A good advisor would have discussed with you your risk tolerance, the potential for a downturn, and the right asset allocation to meet your needs and investment objectives. If your portfolio allocation doesn’t reflect the fruits of that discussion, you may need the help of an investment fraud attorney. In short, how much are you willing to lose, both in terms of percent decline and in real dollars? Know before you invest.

Depending on the investor’s personal suitability and risk tolerance profile, an asset allocation that considers and adjusts for downturn risk may include higher diversity to shield from an individual company’s risk of bankruptcy. Within this diversification, a recession-ready portfolio may feature more value, rather than growth, stocks. A diversified portfolio may also include some international investments to shield against domestic risk from Federal Reserve actions.

Outside of equities, moving some portfolio allocation into bonds can help offset losses in the market, especially for risk-averse investors looking to protect their funds. Bonds of different maturities can also provide some much-needed diversity within this asset class.

Of course, all of these factors can change to suit an individual investor’s needs and to reflect that individual’s risk tolerance. A worthwhile investment professional must make recommendations based on your unique preferences and requirements.

Your broker or advisor is required to only recommend investments that are suitable for your level of risk tolerance, investment objectives, and other factors like age and plans for retirement. If you lose more than you understood was possible, your broker likely breached the suitability duty owed to you, or possibly may have breached Regulation Best Interest, or a fiduciary duty. If you feel as though the downturn has caught you by surprise, your investment professional may have failed to properly advise you of the risks inherent in the market. Not all losses in tough markets indicate wrongdoing—if your portfolio aligns with your risk tolerance and you were well-apprised of recession risk, it’s a good sign your advisor or broker is doing their job.

Are Outsized Losses Plaguing Your Portfolio?

If you think your broker failed to properly allocate your portfolio in your best interests ahead of the downturn and you’re experiencing significant losses, call a Texas securities fraud attorney. Attorney Bryan Forman and the Forman Law Firm, P.C. have experience bringing every possible type of claim against brokers and investment advisors that made unsuitable recommendations and breach duties owed to the investor. With over 30 years of experience, The Forman Law Firm understands the level of care and diligence investment professionals owe to their clients. To learn more, and to schedule a free consultation, reach out to the Forman Law Firm, P.C. at 512-306-8188 today. You can also reach us through our online contact form.

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