Preservation is critical to limiting downside risk. Managing money is different in retirement because of the need to draw income from the portfolio.

Income should be generated through cash flow, or a revenue stream that changes an account over a specific amount of time. Although it may be tempting to rely on appreciation to provide monthly income during retirement, we feel the appreciation philosophy is too risky considering the average returns of the stock market and other investment vehicles.

We aspire to generate all monthly income in the form of cash flow by making use of investments that offer opportunities like dividends and interest. Whether markets are up or down, this cash flow, in addition to the allocation, may help limit risk exposure. Asset allocation is of utmost importance and must be monitored as dividends and interest rates change. Over time, the allocation itself must also be monitored as risk tolerance may also change given the current environment.

We believe in providing enough growth to offset inflation over a given period of time. With interest rates low and the outlook focused on benign inflation, only a minimal amount allocated to growth is necessary. That means opportunistic growth may be utilized when it presents itself. However, given the current environment, you can reduce your risk assets should that correlate with your risk tolerance. When growth opportunities present themselves, you have the cash or conservative assets to reposition and take advantage of them.