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Your Asset Allocation and the Markets: 2016 Investor Losses Total More Than $1.5 Trillion

The stock market decline in 2016 has accounted for $2.3 trillion in investor losses from the market’s top last year and $1.5 trillion in net wealth just this year.

The giant companies that predominantly populate the Standard & Poor’s 500 have fallen an average of 8.9% this year. The S&P 500 is down 8% this year already — including another 2.2% Friday — in what’s been the worst start to a year ever. Since the market peak on May 21, 2015, the market has declined 11.7%.

On average, investors have lost a collective $57 billion per trading day this year.

The biggest losses in value, year-to-date, can be attributed to Amazon, which has seen a loss of $85.9 billion year-to-date, Bank of America with a loss of $64.2 billion, and Alphabet which saw $50.9 billion erased.

A portfolio’s asset allocation is the driving determinant in account performance.  The process of determining which mix of assets to hold in your portfolio is a very personal one. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk.  By investing in more than one asset category, you’ll reduce the risk that you’ll lose money and your portfolio’s overall investment returns will have a smoother ride. If one asset category’s investment return falls, you’ll be in a position to counteract your losses in that asset category with better investment returns in another asset category.

The recent market volatility has exposed imprudent allocations in accounts that have resulted in significant losses to many investors. When asked about why account values have dropped, brokers often respond by blaming it on the market instead of recognizing that inappropriate allocations are actually to blame.