This blog title was taken from a line in the 1988 song Kokomo by The Beach Boys that described two lovers taking a trip to a Caribbean island.
Though it sounds a bit oxymoronic as in going there fast and then reduce the pace, but from a honeymoon trip’s point of view, it is an incentive to hurriedly go to the vacation spot and just chillax upon reaching the destination.
On the economic front, this phrase was used to describe the United States Federal Reserve’s strategy in combating high inflation back in 2022. The “get there fast” referred to the rapid interest rate hike to bring inflation under control, while the “take it slow” was the gradual lowering of interest rates as inflation began to cool down.
From a portfolio management perspective, this could mean “rushing” one’s portfolio to a set value before “calming” it down. In other words, the portfolio would be heavily laden with high-growth/high-yielding/high-risk securities, and once the portfolio hits the mark, it would be pivoted towards more prudent income generating/safe-haven assets/securities.
However, it is not necessary to adopt two extreme approaches to do the “get there fast, take it slow”, i.e., accelerating full speed and then stepping on the brakes. Both ways could be done in a deliberate and measured manner, considering one’s comfort level on the portfolio mix and risk appetite and tolerance.
A good example would be our pivot (which I had described in detail here) that we took six to nine months shifting from a balanced Bedokian Portfolio (35% equities, 35% REITs, 20% bonds, 5% commodities and 5% cash) to a slightly aggressive make-up (15% bonds, 5% commodities, 5% cash, and with the remaining 75% equities/REITs in a free-float from 40/60 to 60/40). It was a slight shift as we still wanted to have the important element of diversification, balancing between a slower growth with some degree of capital preservation. For the slowing down, we had planned to pivot with a less aggressive portfolio depending on the prevailing market and economic situation, with the transitioning taking probably over a period of nine months to a year.
If one thinks about this whole fast-slow scenario, it is akin to the principles of age-based portfolios, with an aggressive structure for young investors, a balanced mix during middle-age, and finally a conservative one at conventional retirement age. The main difference is just that an objective amount is the catalyst for the change in asset class proportion, rather than be dictated by one’s lifetime stages.
No comments:
Post a Comment