At Winthrop, we help our clients live life in the moment while boldly exploring and imagining possibilities for their future. Our approach enables us to explore every aspect of your life so that we can design a big-picture plan and investment solutions that balance practicality with opportunity.
Whoever you are, and wherever you are on your journey, our multi-generational team has all the tools and experience to help you pursue your financial goals—and live your life to the fullest.
From fast-growing startups and closely held family businesses to multi-generational enterprises, we will help empower you to operate more efficiently day-to-day, while laying a foundation for navigating the future.
We work closely and collaboratively with our endowment and non-profit clients to provide investment programs and hands-on portfolio management services pursuing global opportunities while seeking to ensure alignment with key business objectives.
We’re committed to seeking out and sharing the trends influencing markets and the outlooks that might inform our investment approach. In an industry like ours, being open to multiple viewpoints and fresh perspectives is a critical part of how we add value, and help our clients imagine all the possibilities.
In the world of finance, things change fast and there’s always more to learn. We’ve created a series of tools that will help you stay educated and keep you informed about the things that matter most.
Perspectives | November 04, 2022
During periods of market volatility, we follow the same playbook and convey the same messages. At Winthrop Wealth, we follow a Total Net Worth Approach and we believe the right mindset paired with a comprehensive financial plan and a thorough investment process can provide confidence in working toward your long-term financial goals, especially during times of heightened market volatility.
“Don’t try to buy at the bottom and sell at the top. It can’t be done – except by liars.” -Bernard Baruch
Market volatility is stressful and controlling your emotions during these periods is critical. Market timing decisions are often emotional rather than rational and data based. We believe that making sudden large adjustments to portfolios is value destructive over time and a major reason for poor investor performance. Please see our Client Question titled Market Timing Does Not Work, where we discuss that: the stock market has historically increased over time despite frequent drawdowns, the average investor underperforms due to market timing mistakes, and the benefit of a diversified portfolio and a long time horizon. Past performance is no guarantee of future results. Diversification does not protect against market risk. All investing involves risk which you should be prepared to bear.
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and behavioral discipline that are likely to get you where you want to go.” -Benjamin Graham
We believe that financial planning drives the investment strategy and provides a roadmap to each client’s unique goals and objectives. The comprehensive financial plan defines cash flow needs, seeks to optimize account structures, considers tax mitigation and estate planning strategies, and evaluates financial risks as circumstances and/or goals change.
We also stress test the financial plan for many different environments including extreme volatility and market declines. The financial plan does not assume perpetually strong markets and linear returns. Rather it assumes that your portfolio will go through periods of weakness throughout your investment time horizon. We often update financial plans during and after volatility to quantify the impact the market decline had on the probability that the client will reach their long-term goals and objectives. The outcomes presented using the financial planning Monte Carlo simulation represent only a few of the many possible outcomes. It is important to remember that no strategy assures success.
“Good times teach only bad lessons: that investing is easy, that you know its secrets, and that you needn’t worry about risk. The most valuable lessons are learned in tough times.” -Howard Marks
Our investment management process is designed to provide well-diversified portfolios constructed with a methodology based on prudent risk management, asset allocation, and security selection. We help our clients navigate challenging markets by seeking to ensure their short-term cash flow needs are met while managing the rest of their investments in a globally diversified portfolio.
Market volatility can be used to our advantage by tax-loss harvesting or reallocating to more attractive securities:
• Tax-loss Harvesting: Tax-loss harvesting is achieved by selling an investment with a loss and immediately purchasing a different security with similar (but not identical) exposure. The loss on the sold security can be used to offset taxable gains. Since we simultaneously sell a security to capture a loss and purchase a different holding with similar exposure, the client is never out of the market. We can capture losses during declines, and as the market recovers the new position also recovers PLUS the client has a tax-loss to offset future gains. Please see our Client Question on Tax Loss Harvesting.
• Repositioning Portfolios: Repositioning portfolios means that we can increase the overall equity allocation and/or reallocate among various asset classes. During a market selloff, portfolio equity allocations often fall below their target levels. For example, assume a portfolio is invested to its target allocation of 60% equities and then the stock market declines -10%. The new allocation would be about 54% or -6% below the target level. We can use the market decline as an opportunity to buy stocks at lower prices to bring the allocation back to the 60% target level. Furthermore, we can rotate to the equity asset classes that have become more attractive (for equities, we allocate across regions, countries, market caps, factors, styles, sectors, and industries). Keep in mind, some of the best buying opportunities have historically occurred during periods of market turmoil. Rebalancing a portfolio may cause you to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Past performance is no guarantee of future results.
Financial planning is a tool intended to review your current financial situation, investment objectives and goals, and suggest potential planning ideas and concepts that may be of benefit. There is no guarantee that financial planning will help you reach your goals.
Rebalancing a portfolio may cause you to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
Likewise, it is important to remember that no investment strategy assures success or protects against loss. Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. All investing involves risk which you should be prepared to bear.