Fridays with Bradley J. Rathe
Brad Rathe: business owners, and executives. We take a holistic approach to wealth management, dealing with all aspects of a client's wealth, including investments, taxes, state planning, charitable trusts and services, and more.
Brad Rathe: Before StrategIQ I held several executive level positions at hedge funds around the world, including Rotella Capital. I want to thank them and Qdeck for putting this on. It's a great venue for what I'm working on.
Brad Rathe: So today, Friday with Brad, number eight. So I'm going to go with investor questions again. With what's going on
Brad Rathe: I've had a lot of questions, with the run up in the stock market, is there anything that somebody can do to stay invested, to protect themselves
Brad Rathe: from a potential storm. Well, I actually live on the east coast, and protecting myself from a storm was actually relevant recently. I was in the way of
Brad Rathe: Tropical Storm Isaias, or whatever is called, and I took some precautions, just in case. You know, I brought items that, you know I
Brad Rathe: brought my items that might fly around. I went and got gas for my generator, I bought some extra water. I pulled out flashlights and candles, charged my phone, and it actually worked out because I did lose my power
Brad Rathe: for around 24 hours. So, similarly to investing, sometimes the warning signs of there to adjust your portfolio, just in case there is a potential higher probability of a drawdown in your portfolio.
Brad Rathe: Even for long term investors, I think there's times you really want to look to rebalance, change up your risk, maybe even take a little risk off the table. If it warrants it and you see you know potential risk.
Brad Rathe: I think the issue right now is, if you sell something you have to buy something else. Yeah, and I think that's a problem with interest rates at zero, you know. So
Brad Rathe: that that is one of the issues. What I'm seeing right now. But are there some simple adjustments you can make to your portfolio to bring down
Brad Rathe: overall risk? And why now? What are the catalysts for potential for a pullback? With the election, Covid obviously still raging,
Brad Rathe: higher valuation, China trade tensions, there's always obviously risk in investing, but sometimes, you know, it's riskier than others.
Brad Rathe: Sentiment is still somewhat negative, and obviously we continue to move higher, and you know, sentiment starts to become positive, maybe want to even pullback risk more.
Brad Rathe: But, you know, some of the keys to investing, we see is buy low, sell high, stay unemotional, monitor all the economic activity around the world.
Brad Rathe: So what can you do? You know, we think lower beta, maybe add long term treasuries, rotate from expensive to cheap, maybe look at to add some non correlators.
Brad Rathe: What do you mean by lower beta? Beta of one is the market. So if the market drops 10% and you have a beta of one, you're going to lose 10%. We're saying
Brad Rathe: find something that has a beta of, let's say, point five. And that would be like utilities, or staples, things like that. So if the market did drop 10% you would only drop 5%.
Brad Rathe: You know that idea. The other one is long term treasuries have historically been the best hedge, but with interest rates close to zero,
Brad Rathe: I'm not really sure that's probably the best idea, this time around. Brad Rathe: Rotating from expensive to cheap. I think it's probably one of the better ideas right now. The idea of selling growth buying value
Brad Rathe: hasn't worked in past corrections, but this time I think with how everything's going on, it may work much better this time.
Brad Rathe: And the other thing, sell US, by international. This again hasn't worked out particularly well, but with the dollar weakness, you know, and political risk, this could actually be a decent idea as well.
Brad Rathe: The other is non correlators. And we've talked about alternatives and other things, you know, buy alternatives, you're looking at maybe buying gold commodities.
Brad Rathe: Long volatilities, another one that could be really work out really well. Brad Rathe: But in conclusion, it's probably not a bad time to look at your portfolio, try and bring down your risk towards the scenario for, you know, the potential for chaos in equities.
Brad Rathe: Maybe not do everything we talked about, but some pruning, looking at your overall risk, you know, if the potential storm actually hits,
Brad Rathe: you could have some dry powder, and be able to add risk later, rather than potentially panicking and selling at the lows. So lower your beta, maybe rotate to cheaper assets,
Brad Rathe: add some non correlated assets. Some ideas to still stay involved, but pull down your risk. Thank you. This is Brad Rathe CEO is StrategIQ. If you like the podcast and want more information on StrategIQ, please visit our website at sfgweb.com.