Financial Asset Management: Adjusting for Today’s Volatility with Short-Term Investments

NEW YORK - Feb. 29, 2016 - PRLog -- Scott Kahan, President of Financial Asset Management Corporation, sits down with Asset TV to talk about how his clients are handling the increased volatility in the market and the steps his company is taking to help them readjust.

As Scott explains, the first step to the readjustment period is with education.  On a regular basis, his company will share emails with his clients that include market history or information related to the market headlines so that they can better understand the current state of the market.  Since some of his clients panic while others look at it as a buying opportunity, the best way to help both is by simply providing a clearer picture so that they can make informed decisions instead of emotional ones.

For those clients that are looking toward the market for buying opportunities, Scott explains that the process starts with a thorough review of their model portfolios to make sure the percentage allotments of each asset class are not ‘out of whack’.  If they are, then the proper adjustments are made first and foremost.  If the client’s portfolio is properly balanced, however, then a more in-depth discussion is had with the client to determine which stocks are at the proper time to invest.

For those stocks, Scott looks for areas that have been ‘beaten up’, so to speak, as in most cases those are the ones that tend to be underweighted in his model allocations.  Emerging markets is a prime example of one of these areas, and one that Scott feels is at the right time to invest, despite a somewhat uncertain future for a few of them.  Typically, a combination of an active and passive approach is taken, as with an active approach, the large capital gain distributions can potentially cause problems for some clients when the stocks do well.  In those instances, some people might not be prepared for the tax implications that come with the growth.  Mutual funds are particularly prone to this scenario, especially at this time in the market.  Since the past year has shown that there have been time periods when the indexes have done well in comparison to managed funds, and time periods when the opposite is true, Scott believes a combined approach for equity allocations is the smart move across the board.

Within fixed income, Scott reveals that his company has been leaning more toward the short-term due to the likelihood of further interest rate hikes. By using the short-term on ETFs, Scott explains he is able to easily ladder his portfolios using ETFs with 1-3 or 3-5 year corporates.  Then he can add something a little riskier on the other side that might have some foreign exposure or different types of bonds with short-term high yield.  While he is building out the portfolios with both parts, a focus on the short term protects the principal for when interest rates do eventually rise.

To watch this full-length interview, tune into the PULSE channel on Asset TV:  http://bit.ly/1T4kWTN


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