How are Risk-Based Models Positioned Nearing 2020?

Nate Crosby |

I hope you and your family are enjoying our fantastic fall weather. It feels like I was just sending out updates for our second quarter.  2019 has seemed like it has been in fast-forward in our office. Through three quarters most indexes are past where most analysts and experts predicted.  I’m reminded of the late, great Vanguard founder Jack Bogle’s famous words, “Nobody knows nothing.”  This is why when things are going well, we do not concentrate risk and abandon our game plan for greed, and when things seem to be heading south we do not move to all cash because our game plan should allow us to capitalize long-term.  Seasoned investors are patient and as students of history know that market prices move up and down, but overtime they increase in value.  It is also important to remember we are not traders, we are investors.  We believe the future will be an amazing place; and I do.

Crosby Advisory has three basic approaches for clients that are still in the accumulation stage of their lives. Our risk-based portfolios are designed to provide investors with investment exposure that matches their risk assessment.  Our five, basic risk-based models are Conservative1, Moderate1, Moderate-high1, Aggressive1 and Aggressive-high1.  Our second approach is time-horizon based.  These portfolios are constructed based on the length of time until retirement and do not seek to match an investor with risk tolerance.  Our third approach is our custom models, which are utilized when the investor wishes to own individual securities within their portfolios. 

Every quarter we release changes (if any) that we are making to our risk-based models.  Since these models attempt to limit volatility to a certain benchmark we will adjust them slightly as we move through the business cycle. 

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As we have communicated in prior correspondence, we believe that we are somewhere in the late expansion stage.  This does not mean we are predicting a recession in the next six months.  Overall, there is still much to like about the U.S. economy.  At the moment, we believe the biggest threats to market return is not manufacturing, housing, employment rate, or any other leading indicator that we follow, but rather geopolitical and political threats.  The trade war is still a wildcard and news can change in an instant. Like boy and girl scouts, we must be prepared for uncertainty and position portfolios so that we can remain invested. 

Changes to risk-based model portfolios

We have reduced exposure to the healthcare sector.  Healthcare typically does well in late expansionary times, however the upcoming election is making healthcare a battleground topic.  Each side of the isle has drastically different ideas on what healthcare in America should look like.  In general, investing in battleground topics can be difficult to say the least.

We are increasing exposure to large cap dividend paying stocks (value) as well as adding in the consumer staples sector (at 2-3%) for most portfolios.  Consumer staples are items that people purchase in good times and bad and tend to do well in late cycle expansionary periods.  The increase in large cap dividend and the addition of the consumer staples sector does not result in an increase to stock position, but rather a decrease in mid and large cap growth.  The portfolios are still weighted in Utilities and Real Estate , both asset classes have performed exceptionally well thus far in 2019.  When we weight a portfolio in a particular asset class, that simply means we hold a greater amount of it as a percentage of the overall portfolio than what is typical. 

We are continue to reduce exposure junk bonds which are below investment grade bonds. While we still hold some exposure the exposure has been reduced over the past two quarters.  We favor investment grade corporate bonds, municipal bonds and U.S. government issued bonds.

If you are in risk-based portfolio and do not want the above adjustments made to your portfolio, please let us know.  We are honored to serve you as partners in your success.

Crosby Advisory Group, LLC is a Registered Investment advisor in the state of Ohio.  At any time, you may request a copy of our Form ADV 2A and Form ADV 2B, which provides information about the qualifications and business practices of Crosby Advisory Group, LLC.  This article is for information purposes regarding recent changes we made to our risk based models.  If you have not had a consultation Crosby Advisory Group, LLC, this is not a recommendation for you to make any investment. This article mentions several asset classes and sectors, this again is not a recommendation for you to buy these investments without a clean understanding to whether they fit into your goals and objective. Investing involves risk and you should carefully consider all risks and expenses before making an investment. Crosby Advisory Group, LLC is also a licensed insurance advisor.  Insurance newsletter are serviced through Crosby Advisory Group, LLC.  If you have any questions you can send us a comment by visiting our website at Our office number is 419.496.0770