The Cox Connection

Vol 3 Issue 2 ||April 2020

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Re-balancing Your Portfolio

Re-balancing is the process of restoring a portfolio to its original risk profile. There are two ways to rebalance a portfolio.

The first is to use new money. When adding money to a portfolio, allocate these new funds to those assets or asset classes that have decreased their percent allocation. For example, if bonds have fallen from 40% of a portfolio to 30%, consider purchasing enough bonds to return them to their original 40% allocation. Diversification is an investment principle designed to manage risk. However, diversification does not guarantee against a loss.

The second way of re-balancing is to sell enough of the “winners” to buy more under performing assets. Ironically, this type of re-balancing actually forces you to buy low and sell high.

Periodically re-balancing your portfolio to match your desired risk tolerance is a sound practice regardless of the market conditions. One approach is to set a specific time each year to schedule an appointment to review your portfolio and determine if adjustments are appropriate.


Whether it’s sports, music, or politics, life holds any number of “great debates”– debates that never seem to reach a conclusion. In investments, that great debate asks the question, “Active or Passive Investing: Which is Better?”

The fascinating aspect of this debate is that equally intelligent people can argue polar opposite positions, leaving the rest of us to wonder what the answer is, if one even exists.

Passive Pointers: The case for passive management (like the use of Exchange Traded Funds/ETFs that mirror an index) is anchored in the evidence that the preponderance of money managers have failed consistently to beat their comparative index. This is true for two primary reasons:

  1. Markets are efficient and all known information is already reflected in the price of the stock, making it difficult for managers to find companies that are expected to outperform.(1)
  2. The hurdle of an elevated expense ratio typical of actively managed mutual funds makes it hard to match or exceed a low-expense index fund.(2)

Active Arguments: Active managers (like mutual funds that follow a buy and sell strategy) counter that while the markets may be generally efficient, there are windows of inefficiency created by the time it takes for information to properly reflect in a stock’s price.

Active managers further argue that performance is not just about relative return, but also about managing risk. For instance, if an active manager can deliver a hypothetical 90 percent of the index return at 70 percent of its risk, then that constitutes a measure of outperformance.(2)

Unlock the Combination: Ultimately, it’s a decision based on what you want to pursue. Do you prefer the approach taken by index funds or the strategy behind active management? For some, the combination of both funds represents an approach that takes no sides but seeks to tap into the distinctive benefits each offers.

(1.) Keep in mind that the return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. (2.)This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.

Capital Market Update

We hope this message finds you doing well during these unprecedented times. As we move into the second quarter of this year, we want to provide some of our thoughts on the first quarter. All of the major stock indices were down double digits, leading to significant declines for the quarter. Given the backdrop of the expanding coronavirus pandemic and the oil price war, these declines were imminent.

There were some positive things happening during the quarter that should help contribute to a turnaround in the economy down the road.

  1. The Fed started a new round of quantitative easing while also cutting rates to zero.
  2. Federal tax filing deadlines have been extended until July 15, 2020.
  3. The federal government approved a $2 trillion dollar stimulus plan that will help both individual incomes and small businesses.
  4. There are also talks for an additional stimulus bill that would provide assistance for states and individuals, as well as targeted support for the mortgage and travel industries.

After looking at the results from the last quarter, we are satisfied with how our managers have performed during these rough times in the current markets. As this coronavirus pandemic started to play out, we had managers that made defensive moves to help protect the assets in your accounts. While some managers made big moves like moving to 100% cash, others made minor moves to help on the downside of a falling market. Whether big or small, we believe these moves have helped soften the downside participation in your accounts as the market hit lows that we haven’t seen in over 10 years.

If you look back at every bear market in history, you will see a bull market that follows that is substantially bigger, as seen in the chart below dating back to 1937. We believe in times like these that patience is what can reward you the most. We continue to watch closely and monitor accounts. We appreciate your continued faith in us. Please don’t hesitate to contact us if you have any questions or would like to go over your account, 281-395-8300. Please be patient as we all navigate through these tough times. We will get through this just like we have in the past. Stay safe everyone!

Market Performance as of 3/31/20

  • S&P 500 TR: QTD -19.60% and 1 Yr -6.98%
  • Dow Jones Industrial Average TR:  QTD -22.73 and 1 Yr -13.38%
  • MSCI EAFE (International Stocks): QTD -22.83% and 1 Yr -14.38%
  • MSCI Emerging Markets: QTD -23.60% and 1 Yr -17.69%
  • Bloomberg Barclays US Aggregate Bond: QTD 3.15% and 1 Yr 8.93%
  • Bloomberg Barclays Global Aggregate Bond: QTD 1.45% and 1 Yr 6.59%

Total returns of the indices mentioned are provided by Morningstar, MSCI, and S&P Dow Jones. None of these firms nor their Information Providers can guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the information on their websites, including, but not limited to information originated by them, licensed by them from information providers, or gathered by them from publicly available sources. There may be delays, omissions, or inaccuracies in the information. Past returns are no indication of future results. Sources: 1)https://www.fa-mag.com/news/looking-back-at-the-markets-in-march-and-ahead-to-april-2020-55001.html 2) https://www.cnbc.com/2020/03/14/a-look-at-bear-and-bull-markets-through-history.html 3)https://www.morningstar.com/ 4)https://us.spindices.com/indices/equity/dow-jones-industrial-average


Government Stimulus

Here is the Cox Global question checklist to review before spending your government stimulus check:

1. Can I pay for next month's rent, groceries, and utility payments?

2. Do I need to add money to my emergency fund?

3. Do I owe the IRS money?

4. Do I have any outstanding debts?

5. Is there a person or group of people who can use my check more than me?

6. Is there an investment opportunity?

Remember this check is to help secure your current financial situation as much as possible. Spend it wisely.

SBA Resources & Guidance for small businesses: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

We welcome your appointment with our office to review your portfolio or current scenario. Please don't hesitate to call 281-395-8300. We want to be there for you when you need us. Let us know how we can help.

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Cox Global Associates, Inc. || 1260 Pin Oak Road, Suite 204 || Katy, TX 77494 || 281.395.8300 https://www.coxglobalassociates.com/ || info@coxglobalassociates.com

Securities and Advisory Services are offered through Geneos Wealth Management, Inc. FINRA, SIPC. Investment advisory services also offered through Cox Global Associates, Inc., A Registered Investment Advisor.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. "The Great Debate Conitnues: Active vs Passive" and "Rebalancing Your Portfolio" were developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2020 FMG Suite.