Portfolio management can be rebalancing act

Janet Kidd Stewart, in a special the to Tribune Newspapers, discusses the different ways to think about market volatility and manage it in your portfolio.  She quotes Dave pointing out that  just because your portfolio may be correlated in the short-run with some narrow market index like the Dow Jones Industrial Average, doesn’t mean the performance will be the same over the long run.

“Clients will sometimes say, ‘Dave, you keep telling me not to pay attention to the Dow (Jones industrial average), but it seems like my portfolio just tracks … it,'” said Dave Yeske, co-founder of wealth management firm Yeske Buie.

To illustrate how a diversified global portfolio has outperformed the Dow index of 30 U.S. industrial companies, Yeske shows clients a chart outlining the performance of both over the last decade. Their relative movements do track closely, particularly in downturns, but the broader portfolio’s gains are substantially larger.

“The fact that they’re moving in sympathy doesn’t mean they’re producing the same return,” he tells clients.