John Dean: It’s not just about planning. Planning is one thing, but you’ve got a whole, strategy. You have somebody who can manage it and say, “Well, you know, you should probably have some element of annuities here. You should probably be in some small cap and all that stuff.”

Rick Plum: How much money do you need in a Bucket number one style investment? How much money can you have in a pure growth environment, which would be in all equity or real estate type position? How do we determine what that allocation is going to be, and how do we add to and subtract from the portfolio depending upon where we are in our investment cycle? There are ways for long-term growth managers, especially people that oversee the allocation, to try to reduce the volatility. So there’s a couple of measurements that I like to look at and it has to do with your benchmark, who you’re trying to beat, is going up. Is your portfolio going up? And if so, how much? At what percentage of the upside are you realizing in your allocation? On the other side, when the market’s going down, how much of the downside?

If I can find a way to get 100% of the upside with something less on the downside, that’s great, not always easy to do. But if I could get 70%, 80% of the upside, so that in a year like 2016 when the S&P by itself was up about 17%; my growth portfolio was up 10 or 12. and then in years when the S&P is down maybe 10%, and I’m only down 2 or 3, that may be an acceptable issue for me. Good money managers will tell you that this can’t be money that you have to spend in the next couple of years. So you have to have an overall strategy of money management before you get into the different types of allocations.

You don’t have one allocation. You have different allocations for different time sets. When you have money that you need to withdraw in the next 5 or 10 years that may be one allocation. And it has nowhere near the volatility or the potential return on the other side that the money you don’t need to spend for 15, 20 years has. And you don’t mix and match. You don’t take your income arbitrarily from the whole portfolio and then rebalance. And unfortunately, there’s a lot of companies out there who disguise money management as financial planning. They give you a two page questionnaire, and they’re looking at ways to try to make you believe that they’re managing the volatility of your portfolio. But they’re breaking the most common sense rule there is, don’t sell something when it’s down.

This material was gathered from sources believed to be reliable, however, its accuracy cannot be guaranteed.

The S&P 500 Index is an unmanaged index and includes a representative sample of large-cap U.S. companies in leading industries. An investment may not be made directly in an index.

Rick Plum is a registered representatives of, and offer securities through, Lucia Securities, LLC, a registered broker/dealer, member FINRA/SIPC. John Dean is an associated person of Lucia Securities, LLC.

The views and opinions expressed on this show do not necessarily reflect those of Lucia Capital Group or its affiliates.