Oak Ridge Dynamic Small Cap I (ORSIX) — launched in September 2015 — seeks to capitalize...
6 Funds for Peace of Mind
08/19/2011 7:00 am EST
Eric Kies is of the mindset that investors are best served by sticking with their investing plan at times like these, when market volatility is scaring many. He tells MoneyShow.com’s Kate Stalter about six Dimensional Funds he’s putting clients into these days.
Kate Stalter: Today we’re speaking with Eric Kies, and he is with the Planning Center in Moline, Illinois. Give us your take on the current market conditions, with the volatility that we’ve been seeing in the recent sessions. What do you believe is important for individual investors to be aware of right now?
Eric Kies: It’s obviously a very, very volatile time in the markets. There’s a lot of insecurity out there, just with what’s going on with the sovereign debt issues, what’s going on in Europe, what’s going on with the United States, budget deficits, and even the state budget deficits. I just think that it’s a really, really volatile time right now.
Kate Stalter: What are some areas that, in your view, are showing some particular strength at this time? Either in terms of asset classes that you like, global regions, or even stocks or funds?
Eric Kies: Well the primary thing that we always stress with our clients is, first and foremost, you need to have a financial plan. A properly structured portfolio is really just a reflection of a properly built plan.
You need to have your portfolio set up so it lines up with the goals that you have, and the risk is appropriate for your situation and your risk preference. That always drives the overall portfolio decision.
Then, more specifically, once you make those higher-level decisions, you can get into portfolio management. For example, this last few weeks we’ve been rebalancing out of bonds and into equities and specifically we primarily use Dimensional Funds, DFAs.
In our August 5, 2011 rebalance, we are really pouring money into the value funds. The DFA US Small-Cap Value (DFSVX), the DFA US Large-Cap Value (DFLVX), the DFA International Value Portfolio (DFIVX) and DFA International Small Cap Value (DISVX) funds. That’s where a lot of the dollars were going in our most recent rebalance.
Kate Stalter: What are some areas, then, that you believe individual investors should make sure they avoid these days?
Eric Kies: I really think that the biggest thing to avoid is accepting too much risk. I think you really need to have a good cash buffer. That’s your first line of defense.
Then, I think when you look at your portfolio, you need to make sure that you’ve got a certain number of years parked on the side in short-term, high-quality fixed income. Because that allows you to protect your income, but lets the stocks go up and down and provides that bridge out for five or ten or 15 years. Which, if we do take another downturn, then that definitely gives you time for it to recover.
Kate Stalter: Any particular fixed-income vehicles that people might want to take a look at, as they’re doing their research?
Eric Kies: Sure, sure. You know again, we primarily use Dimensional Funds, so our short-term is the DFA One-Year Fixed Income Portfolio (DFIHX). We also use a lot of the DFA Five-Year Global Fixed Income (DFGBX). Then, year-to-date, the inflation-protected bonds have been very good.
Kate Stalter: You’ve mentioned a number of the vehicles that you do like these days. Anything else that you think investors should be researching right now?
Eric Kies: Honestly, I really think it comes down to structure and behavior.
Study after study says that by making short-term, knee-jerk reactions, people tend to hurt themselves. That’s both the retail investors, as well as the professional advisors, so I really think you need to have a disciplined structured decision making process and then stick with it through thick and thin, even if we do go through another downturn.
Related Articles on FUNDS
One of the areas of the investment world that has been gaining in popularity in the last five years ...
On August 1, Fidelity took direct aim at index fund competitors Vanguard, Blackrock’s iShares ...
Investors often ask me how to build a portfolio that holds its own in down times but hands them soli...