The Full Motley -- 2Q, 2020

Only you are responsible for your portfolio.

"Only you can prevent forest fires" was ingrained into our American lexicon during the 1980s. The focus was on the importance of taking individual responsibility for our personal actions that may lead to greater issues, in this case a sweeping wildfire that creates billions in damage.

Personal responsibility has often been an online battlefield, but personal finance is unquestionably one area that requires individual responsibility for personal actions. Unlike uncontrolled wildfires, the consequences are often contained to the individual who is accountable. Social media often endorses both a victim mentality and self-empowerment simultaneously with minimal success. Those two mindsets are difficult (if not impossible) to maintain as an amalgamation.

While sweeping wildfires in the stock market are known as stock market crashes, we are helpless to prevent them. But protecting it from burning our personal accounts can be managed through a few general rules. Creating a target allocation, creating an investment plan and creating investment goals are important because they can answer how to manage through unexpected market crashes. For long-term investing, including wealth accumulation, market crashes are unlikely to disrupt allocations, plans or goals. It may modify them to varying degrees, but focusing on what you can control, instead of worrying over what you cannot control, will ease the anxiety that can be ever-present in a market crash.

My investment plan includes quarterly reallocations, resetting the account balance back to my own target allocation. In my case, when the market plummeted shortly after my first quarter reallocation, I knew that my next reallocation was only 10 weeks away. If the market furiously declined for the entire 10 weeks, then my reallocation would be hefty. If the market fell and then quickly recovered, then my reallocation would be insignificant. Instead, the market fell and then slowly started regaining its losses unsteadily, so this reallocation was relevant.

Unsurprisingly, I pulled money from my two bond funds to place back into the three equity funds. The biggest surprise was the fact that my domestic stock index fund received a very small amount ($50). The difference was mostly in the active domestic equities fund. Individuals selecting stocks had a slower recovery than the broad index. Ideally, those strategic choice will show up in a later reallocation. Otherwise, this active domestic equities fund is a losing investment (because the amount allocated into that fund is returning less than the next closest alternative, i.e. my domestic stock index fund).