Too Much of a Good Thing in Your Portfolio?

MICHAEL TOWNSEND: I've been thinking a lot recently about what a weird year investors are having. The first quarter of 2026 saw the quick removal of the president of Venezuela, the kerfuffle over Greenland, a Supreme Court decision tossing out the majority of the president's tariffs, and then the start of the war in Iran, which shut down the Strait of Hormuz, the vital shipping channel that plays an outsized role in the movement of oil, liquefied natural gas, fertilizer, and goods around the world.

Investors, unsurprisingly, were a bit spooked by it all. The S&P 500® was down more than 4% for the quarter, the Nasdaq nearly 6%. But wow, did things turn around in the second quarter. Corporations reported strong earnings across almost every type of business. There was a ceasefire, sort of, in Iran. There was a notably un-dramatic transition at the top of the Federal Reserve, a summit between President Trump and President Xi of China, a boom in AI infrastructure spending, one of the most anticipated IPOs ever. Investors took it all in and breathed a sigh of relief and started buying. By the time we reached July, those first-quarter losses were a distant memory. The S&P 500 was up 15% for the quarter, the Nasdaq a whopping 21%, the best quarter for both since the COVID rebound in 2020. Right now, both are on track for a fourth consecutive year of double-digit gains. 

But it still feels like there is so much instability out there. The fragile ceasefire has collapsed. Inflation continues to creep upwards. The market is anticipating a Fed rate hike later this year. It's a roller coaster, to say the least, and it's made a lot of investors more anxious than you might expect after such a booming quarter. 

Welcome to WashingtonWise, a podcast for investors from Charles Schwab. I'm your host, Mike Townsend. And on this show, our goal is to cut through the noise and confusion of the nation's capital and help investors figure out what's really worth paying attention to. Coming up in just a few minutes, I want to explore how investors are processing this barrage of often contradictory information and news, and what strategies investors should be thinking about to navigate those waters. To help me do that, I've invited back to the podcast Daniel Stein, who manages two Charles Schwab branches in Virginia, where he and his team talk every day to ordinary investors, helping them manage the highs and lows of investing amid a never-ending news cycle. 

But first, here's what I'm watching in Washington right now. The Supreme Court issued a flurry of decisions as it ended its term this summer, from birthright citizenship to campaign finance. But the one the markets were watching most closely was how the court would deal with the president's unprecedented attempt to fire a sitting member of the Federal Reserve Board of Governors. President Trump attempted to fire Fed Governor Lisa Cook last August, ostensibly over allegations that she committed mortgage fraud before she was even nominated to the Fed. It's important to note that she has never been charged with any crime. Cook immediately sued the president, and multiple lower courts ruled that she could stay on at the Fed as the case eventually made its way to the Supreme Court.

On June 29, the Supreme Court ruled in a 5-4 decision that Cook can continue to serve at the Fed while her challenges to the president's attempts to fire her proceed through the lower courts. The law allows the president to fire a Fed governor only for cause, and lower courts have indicated that for cause should not cover conduct before taking office. Courts have also ruled that Cook was not given appropriate notice and an opportunity to respond to the allegations.

But while the Supreme Court ruled on the lack of due process in the case, it did not ignore the larger implications for the central bank's independence. Writing for the majority, Chief Justice John Roberts wrote, "Not only the fact of independence, but the appearance of independence is key to the Federal Reserve's design." The chief justice went on to say that allowing the president to fire a Fed governor without any process "would in effect transform the Federal Reserve's for-cause protection into at-will employment, an interpretive leap out of step with the statute Congress enacted and our nation's tradition of central banking protected from political interference." It's a hugely important development, sending a signal to the markets that the Fed's independence will remain a cornerstone of the economic system.

Elsewhere, late last week, the most significant housing legislation in at least three decades became law, the culmination of more than a year of bipartisan work in Congress. But it became law in a very unusual way. The legislation aims to boost supply and lower the cost of housing. It expands grants for states to build more affordable housing and takes steps to cut red tape and streamline the permitting process. It has a pilot program to make it easier for home buyers to obtain small federal loans. It also bans large institutional investors from owning more than 350 single-family homes. And, in an unrelated provision that was important for winning over conservatives on Capitol Hill, it prohibits the Federal Reserve from creating a central bank digital currency over the next three years. 

In the end, the bill passed the Senate by an 85 to 5 vote and passed the House by a margin of 358 to 32. It took a lot of negotiation, but this was a bill that basically everyone across the political spectrum got behind. Even the president said he supported it. There was a big public signing ceremony set up in the U.S. Capitol. There was seating and flags and a stage and a desk where the president would sit and sign the bill in front of members of Congress from both parties. But about an hour before that ceremony, the president canceled it. He said he wouldn't sign any legislation until Congress passed his election security bill, known as the Save America Act, a controversial bill that has been bogged down for months because it simply does not have the support to pass the Senate. 

Under the Constitution, a bill passed by Congress becomes law ten days after it is transmitted to the White House if the president takes no action. And that's exactly what happened here. On July 10, the bill quietly became law because the president neither signed it nor vetoed it. It's a rare, and frankly kind of odd, outcome. A bill with overwhelming support that tries to address affordability, which is one of the key buzzwords of the 2026 midterm elections, became law with no fanfare at all. 

As for the bill itself, the reality is that it's a long-term play. It will likely take a year or two, or maybe more, for the effects to be felt in the housing market and the broader economy. It's a big win for companies that build houses. And it's an extremely rare example of Congress working together in a bipartisan manner at a time when that is almost unheard of. 

Finally, Trump Accounts, the new investing vehicle for children, have been all over the news in recent weeks after they officially launched on July 4. Trump accounts were created by last year's One Big Beautiful Bill. Parents can open an account for a child of any age and can contribute as much as $5,000 a year.

Companies and philanthropists can contribute as well, and many have announced that they will do so. When the child turns 18, the account becomes a traditional individual retirement account. The goal is to build a nest egg for a new generation of investors. But the most notable feature is that the federal government will provide a $1,000 seed contribution for any baby born 2025 through 2028. On July 4, those seed contributions started going into the accounts of eligible children. 

Over the last few weeks, the administration has made several announcements about how the accounts will work. It chose an index fund from State Street as the initial default investment for the accounts and selected four more index funds, two from iShares and one each from Vanguard and State Street, as additional investment options that will be available soon.

It's also expected that in the coming months, parents will be able to transfer the account to their preferred provider if they so choose. The government also announced that it would begin accepting donations of stock for the accounts later this year. Details are expected in the coming weeks, but there's a lot of interest in whether stock donations to these accounts will be treated similarly to stock donations to a charitable organization, in which case Trump accounts could become a part of charitable planning.

Expect a marketing blitz from the administration over the next six months to raise awareness of the accounts. The Treasury Department announced last week that more than 6 million parents have signed up for the accounts, and that about 1.4 million are eligible for the contribution from the federal government. But that still represents less than a quarter of the babies born since the beginning of 2025. So there's a long way to go to reach all of the eligible families. 

On my deeper dive today, I want to take a closer look at some of the things that are top of mind for investors right now. The first half of 2026 saw double-digit gains for most of the major indexes, but the ride to get there has been anything but smooth. It's easy to forget that all of the major indexes were in negative territory at the end of the first quarter, only to rebound in a big way in the second quarter. Expectations about what the Fed will do have completely flipped since the start of the year, when the market was anticipating rate cuts. Now the market is expecting rate hikes by the end of the year. Investors saw the first of several eagerly anticipated high-profile IPOs rolled out and watched as its price soared and then pulled back to about even with its debut price. We have the on-again, off-again, now maybe on-again war with Iran and its impact on oil prices, global trade, and inflation.

It's a lot for investors to even keep up with, much less respond to. To help me unpack what's going on and what investors should be paying attention to in the second half of 2026, I'm pleased to welcome back to the podcast Daniel Stein, who manages two Charles Schwab branches in Virginia. Dan's my go-to source for the perspective of the ordinary investor, because that's who he and his team spend most of their days talking to. Dan, thanks so much for joining me today.

DAN STEIN: It's great to be back, Mike.

MIKE: Well, Dan, let's dig into what's going on with the markets so far this year and how investors are reacting to it. As I mentioned a moment ago, the difference between the first quarter and the second quarter of 2026 has been pretty remarkable. It feels like earlier in the year, policy and geopolitics were having an outsized effect on the markets. Tariffs, the war in Iran, the price of oil, challenges with global shipping. The market was really reacting to every little scrap of news. Then it feels like the market just stopped paying attention to all the details, and we started to see a really impressive rally. Yet some of the underlying issues haven't been resolved. New tariffs are likely on the way. The ceasefire in the Middle East has fallen apart. Shipping through the Strait of Hormuz had improved but has plummeted again. So how are the investors you talk with feeling about all of this? Are they still bullish on the markets, or are they starting to worry about a pullback?

DAN: Well, can my answer be both? So you just pointed out the tale of two different quarters to start out 2026. We've been saying for a long time that volatility is an increasingly regular condition in the markets and one that long-term investors need to tolerate, both emotionally and tactically through a long-term strategy. Now going back to 1980, the average intra-year decline in the market was nearly 15%. Just last year, the MSCI World Index had an intra-year decline of 17% but still finished the year up 19%. So a lot of investors have become more and more accustomed to this. And on the heels of the Q2 returns you just mentioned, it's understandable that many investors still focus on the potential growth opportunity ahead. But we are hearing from clients that, while they have been bullish, they're starting to have concerns that the next correction of the markets might not be followed by such a swift rebound. And that makes them nervous. 

So on one hand, it's a good thing that long-term investors may be getting more accustomed to the volatility and risks in the market, because oftentimes the biggest risk to a long-term strategy is panicking when the market pulls back, selling out, and missing the recovery. But on the other hand, the recent history of high returns and swift recoveries may be creating too much complacency or overconfidence in investors whose allocation has now strayed way off course from their actual risk tolerance.

With inflationary risks, high valuations, geopolitical uncertainty, there is a lot of potential for shocks to the market, and investors can't be turning a blind eye here.

MIKE: Yeah, it seems like those risks really come into play with so much focus right now on the big tech companies, the big AI companies, the big chip companies. But I think one of the most interesting aspects of the market right now is that the Russell 2000 small-cap index has been a star performer so far in 2026. It surged 22% in the first half of the year, its best first half performance since 1991. That's a significant outperformance of the large-cap indexes.

And maybe that signals that the rally has more breadth and depth. Are you seeing that investors are overexposed to the mega caps when you add up their individual holdings plus what's in the funds that they're invested in? And where are you pointing investors to find opportunities away from the big names that have dominated the conversation in the last couple of years?

DAN: There's no question that one of the biggest risks that many investors face right now is overconcentration. This is a product of the leadership that several of the mega-cap stocks you mentioned have seen. Now, the last time I was on this pod, we talked about the concentration investors may not realize they have when they hold index funds. In an S&P 500 index fund, an index that, as its name suggests, contains 500 companies, the top 10 holdings combined make up more than 35% of the index, with popular names like NVIDIA, Apple, and Microsoft at the top of that list. So for investors holding individual names like these in addition to S&P 500 index funds, well, their exposure to these companies might be much bigger than they realize. 

Now, as to your question on where we're pointing investors to find other opportunities, in addition to addressing overconcentration risks to individual companies, we also look at overconcentration to asset classes. You just mentioned the returns small-cap stocks have seen and how they've outperformed large-cap stocks year to date. Well, so far in 2026, emerging-market stocks have outperformed small caps, and commodities have handily outperformed them all. In 2025, emerging markets were up over 33%, and international developed up over 31%. And they had a very wide margin over small caps that came in at 12.8% return and large caps at about an 18% return. And commodities, well, they lagged far behind them all at 7%.

Go back another year to 2024, and it was large caps that led by far in performance at 25%, with small caps at distant second at 11.5%. And then international, well, it lagged well behind. That year emerging was up only 7.5%, and developed just 3.8%. 

Now, Mike, I could keep going and bore you with a further longer history here, but the takeaway is that historically, when you take the annual rankings of asset class performance from year to year, the winners and the laggards jump around regularly. This changing of the guard with large caps and mega caps lagging behind, well, historically that's normal. And it's why we advocate for portfolios that are diversified across these asset classes to provide diversification and smooth the ups and downs over time. 

So for clients that have become overexposed to mega-cap stocks, or maybe individual semiconductor stocks that have had outsized gains, we recommend looking for opportunities to rebalance a portion of these holdings to other asset classes that have less representation in your portfolio.

MIKE: It's fascinating to look at the S&P 500 index right now and look at the ranking of the individual companies. And some of the biggest, most famous names are very near the bottom, while maybe some less-known names are very near the top. So it's a good reminder that the position on those rankings is always shifting. Well, Dan, the other big development that has investors excited has been a series of high-profile IPOs.

We just had probably the most anticipated IPO in a decade or more. That's SpaceX. Huge demand, huge excitement. But it's been a wild ride over its first month with the stock now trading below its initial trade price upon its debut. Is this a cautionary tale for investors? What are you hearing from investors? And what advice are you giving to those who want to participate in these IPOs?

DAN: Well, this is definitely a hot topic these days with the recent SpaceX IPO you just mentioned and also the anticipation of upcoming IPOs from big names like OpenAI and Anthropic. One important truth to get out there is that IPOs aren't a free lunch. There can be some misconception that all IPOs pop out of the gates, and they keep the run going, and that participating in an IPO provides some kind of risk-free return, but that just isn't the case. If you look at what's happened with IPOs over the past three years and their performance one year after launch, you'll find many cases where the stock had negative returns. And in the cases where the returns were positive,  less than half of them outperformed the S&P 500 over the same time period. So it's also important to consider the opportunity cost of buying that IPO versus something else that you might otherwise invest in. 

So if you're interested in participating in an IPO, you first need to ask yourself why that company interests you. And then how the purchase would fit into your overall portfolio and investment strategy. If you're interested in participating in the IPO solely because everyone's talking about it and you don't want to miss out, well, I'd argue that that isn't a very good reason to invest. But if you've done your research, you've concluded that it's a company that you feel strongly about, and you'd be willing to buy it right now on the secondary market if it was already trading, now that's a stronger argument for participating. 

When you've made that decision to participate, and particularly once you know how many shares you're able to purchase, you should consider if that purchase materially impacts your portfolio. If the purchase would put you overweight on a certain sector or asset class, you want to assess if you should be rebalancing around it to get back to your target. A lot of people get caught up in the excitement of big names coming to market, and they fail to take a step back to weigh how it would actually impact their existing portfolio and their long-term investing strategy if they participate. So for any long-term investor, just as you would do your due diligence before pulling the trigger on a trade for any individual stock that's already trading today, make sure you apply that same due diligence to the decision of participating in an IPO.

MIKE: Well, when you talked about how an IPO might impact your existing portfolio, I think it's really important to talk about another aspect of the IPOs, and that's the fact that some of the indexes have changed their rules to include newly public companies much closer to their first trading day than has been the case in the past. SpaceX, for example, joined the Nasdaq-100® index on July 7, less than a month after its debut as a publicly traded company. Other indexes will be doing the same, though notably that won't be the case with the S&P 500, which will wait until next year before SpaceX is likely included. So how does this impact investors that own index funds and are interested in the IPO at the same time?

DAN: Well, this is another big topic of late, as we talked to a lot of investors that have read commentary around the impacts of index funds adding IPOs to their holdings far sooner than they previously have been allowed to. Several indexes changed their policies around including large IPOs much closer to their initial trading date. The one that probably got the most attention is the one that you just mentioned, the Nasdaq-100. But the FTSE Russell U.S. equity indexes, they also changed their policy to allow for very large IPOs to enter the index on their fifth trading date.

Now, when this was announced, there was a lot of commentary written about how this was bad for the holders of those index funds. There was commentary around how forced buying of the shares would prop up the share price for those with early access to then sell the shares and drive the price down. And there were arguments made about how it would create overconcentration in the indexes, among other dissents on the policy. 

Now I believe these concerns are overblown. So first off, they make a lot of assumptions about just how much short-term selling holders of the stock would be looking to do. And while I made the point earlier that not all IPOs go up and outperform the market in their first year, well, some do. So there's always a chance that the stock does well, and holders of the index funds actually benefit from its inclusion. Now the other important thing to note is that index funds don't simply add companies based on their market capitalization. Some, like Nasdaq, limit the weight of a company in their index by the float. And the float is the percentage of shares in the company that's available for public trading.

SpaceX has a very low float of around 5%, which will limit its weight in index funds. And that means if you hold the Nasdaq-100-based index funds, only about 1.25% of the fund is invested in SpaceX. If you hold a Russell 1000-tracking index fund, SpaceX represents just over a tenth of 1% of the holdings. So even within the Nasdaq-100, it's a far cry from the heavy weighting of the mega caps in the S&P 500. The same concept I mentioned earlier still applies here. If you own a stock like SpaceX that gets added to an index fund like a Nasdaq-100 in a meaningful way, or if you're thinking about making a purchase, well, it's a good idea to quickly assess how much of that stock you already own through your index funds, especially if you hold multiple ETF or mutual funds that now include the new offer.

MIKE: Great reminder of how you need to look at the whole portfolio and what's in the index funds, what's in the mutual funds, what's in everything you own, as well as the new purchases. 

I want to shift gears, Dan, to the Federal Reserve. After multiple rate cuts last fall and speculation at the start of this year about when the next cut would occur, now the talk is all around a potential rate hike. On the last episode of WashingtonWise, I talked with our colleague Colin Martin, our fixed income expert, about how a potential rate hike could impact Treasuries. A rate hike doesn't necessarily immediately impact the interest rates that we all think about as everyday consumers, things like mortgages and car loans. But it does signal how the Fed is thinking about the overall health of the economy, and it can have a broad ripple effect. A rate hike means Treasuries have to pay more interest, and that corporate bonds have to pay more interest, which can impact a company's bottom line. And that, of course, can impact stock prices.

How would a rate hike, if and when there is one, change your guidance to investors?

DAN: You're right. Interest rates can have an impact on the markets, and we keep a close eye on it. That's why much of Schwab's current guidance already takes this possibility into account, and in many ways, the possibility of a rate hike is already being reflected in the markets. Now, economic activity remains strong. We're seeing solid corporate earnings growth. The labor market has been resilient. A rate hike would be intended to cool growth and inflation, but it wouldn't necessarily immediately flip the landscape that has been favorable to the market as a whole. 

Higher borrowing costs, however, are generally a headwind for growth companies relying on borrowing to fund operations. So we'd likely see impacts, particularly with companies that have low or no revenue and large amounts of debt. Our current sector views take the rate environment into account. Given the risks around inflation, evolving Fed policy, geopolitical events, and shifts in investor sentiment, we have an overall neutral view on equities right now. 

From a sector standpoint, we favor industrials, which are still supported by increased capital spending in key growth areas like electricity capacity, construction around the artificial intelligence-related infrastructure build-out,  defense, and energy, which also supports our favorable outlook on materials. The healthcare sector is expected to benefit from technological advances in improving operational efficiencies, and communication services ranks well on fundamental measures, but lofty valuations and concerns about high AI spending and potential advertising disruption have increased.

Now, on the flip side, we are less favorable on consumer discretionary, as fundamentals have weakened recently with softer revenue and free cash flow trends relative to other sectors, and an interest rate hike would also put further pressure on consumer ability or willingness to make purchases that aren't a necessity. We're also less favorable on real estate as it continues to be challenged by supply imbalances in the commercial office segment, which have been in place since the COVID-19 pandemic in 2020.

In this scenario that would also see a more direct negative impact from a rate hike. A rate hike is one of the risks on the table that we would want investors who are overweight in equities to be considering as it applies to rebalancing their portfolio.

MIKE: Let's broaden out that rebalancing concept just for a moment. For a lot of investors, a rate hike might signal it's time to move from a risk-on approach to a risk-off approach. If that's my mindset as an investor, where should I be looking to put my money?

DAN: It's important to remember that going from risk-on to risk-off does not mean flipping a switch and going all to cash. But there are a lot of times where it is absolutely appropriate to be taking some risk off the table. Now I mentioned before that some sectors could be favorable places to reallocate for more aggressive equities that have seen outsized gains. But beyond that, if the outperformance in the equity markets over the past several years has caused your overall allocation to stray far from its target, well, this is a good time to take a good look at the equity versus fixed income in your portfolio and rebalance as necessary. Even in an environment where there is a risk of rising rates, fixed income still plays a critical role in a portfolio, particularly for those in retirement that are looking to earn income while also drawing down the portfolio. Among other diversification benefits, the fixed income bucket of your portfolio gives you a place to draw from in times of market pullbacks, where you aren't forced to sell stocks at an inopportune time.

Within these fixed income investments, we recommend keeping duration in the two- to 10-year range, as shorter-term fixed income is going to be less negatively impacted if we do see rising rates. 

Now, one last thing I want to add around this concept of rebalancing is that, in practice, many investors managing their own portfolios fail to do it regularly, if ever. Part of the reason is not wanting to sell stocks that have been performing well. Instead of looking at this as a way to help manage or reduce risk to gains, people often think about the missed opportunity if those stocks continued to go up. This is where I remind investors that it doesn't have to be an all or none decision. Think about trimming these positions as a small form of insurance. If you reduce your position and the stock pulls back, you will at least have diversified into other investments that might have fared better.

Now, if you sell some of the position and it continues to increase in value, well, take that as a win that you still saw additional gains while taking some of the risk off the table. 

Now, Mike, this isn't a perfect comparison by any means, but I look at a strategy like this like I look at my term life insurance. My wife and I have 10- and 8-year-old boys. We both have term life insurance policies to provide for the family in the event that something happened to one of us. Every year I pay my premium, and when I do, I never think about the previous year's premium and say, "Well, that was dumb. I wasted that money because I'm still alive." Well, no! I'm glad that I'm still here, and I happily pay for another year knowing that I'm taking risk off the table. So the takeaway here is not to second-guess your decision. If rebalancing leads you to selling stocks that went on to have further outsized gains, you can't look at that as a missed opportunity. Instead, you need to focus on the fact that you took risk off the table, you smoothed out the ups and downs in your portfolio, and remember, things could have gone the opposite way.

MIKE: I want to ask you about another part of the market where I do think there's some fear of missing out kind of driving things. And this is something I have no doubt that you're hearing a lot about from investors. And that's alternative assets generally. It seems like everyone is interested these days in cryptocurrency and, even more recently, the prediction markets. I've got a son who's 18. Feels like all of his friends are on their phones betting in the prediction markets, whether it's on sports or whether some pop singer is going to say something from the stage at a concert. As we continue to see regulations loosened around cryptocurrency and the prediction markets, what should investors know about the risks that are involved?

DAN: Well, it's important to know that just because regulations have loosened and enhanced the ease of access to cryptocurrency and prediction markets, it doesn't necessarily mean that everyone should be acting on that access. Now, as a firm, we continue to enhance our offerings to trade and custody cryptocurrency. And listeners might have heard recently about Schwab entering the prediction market through instruments tied to S&P 500 performance. Well, we want interested and disciplined investors to have access to these markets, but we continue to educate clients on the risks involved.

Our view on cryptocurrencies remains that they are highly speculative investments that regularly see large price swings and volatility, and they should be seen primarily for trading with a proportionally small allocation of funds outside of a traditional long-term portfolio. 

When it comes to prediction markets, we can't stress enough the important difference between gambling and investing. Now, gambling should be seen as a form of entertainment.

If you're wagering on a yes or no outcome unrelated to the financial markets, whether it's sports, current events, politics, if you see that wager as money that you're willing to lose for the entertainment of having skin in the game, and that money wouldn't affect your financial life whatsoever if it was lost, well, that's wagering for entertainment. But if those wagers continue to grow in size and the amount at stake does have a material impact on your finances, well, now it's a problem.

We work with a lot of clients that have accumulated wealth responsibly. And although I'm sure there are cases of it happening, I can't say that we've seen any issues with clients losing their retirement funds gambling in the prediction markets. However, what is far more common and is a growing issue is younger investors missing the opportunity to begin building a nest egg by gambling those funds away rather than investing responsibly instead. We'd prefer to see investors owning real assets in parts of actual companies rather than owning a betting slip.

MIKE: Yeah, Dan, as you know, our colleague Liz Ann Sonders, Schwab's chief investment strategist, has talked a lot recently about this difference between gambling and investing. And she characterized gambling as hoping, whereas investing is about ownership, as you said. I think that's a really good message to remember. 

Well, I always like to wrap up these conversations with the big takeaways. So Dan, what are the top three things that investors need to consider and what actions can they be taking right now?

DAN: Well, Mike, here are my top three takeaways and action items that we're helping our clients focus on each and every day. Number one, we started out by talking about how a lot of investors remain bullish with their investment positioning but are getting increasingly concerned about a pullback. So for every investor out there, ask yourself, would you be able to live with a large drawdown in the market of, say, 20 to 30%? Would that kind of decline in your portfolio have a material impact on your retirement or other financial goals?

And if the answer is yes, it's likely time to revisit the allocation of your portfolio. Again, with the outsized market returns over the last several years, we see many clients who now hold a disproportionately high percent of their wealth in equities in relation to fixed income that no longer aligns with their risk tolerance or their goals. 

Number two, if you don't have a clear picture of what your goals actually are or how your portfolio should be positioned for what you're trying to achieve, get a plan. The most important thing we can do as investors is have a long-term investment strategy that's based on our own very unique situations in life. Having this plan helps ensure that we're invested appropriately and that we're prepared for the inevitable ups and downs the market will throw at us. 

And third, don't live your life full of "what ifs." Earlier I mentioned how important a disciplined rebalancing strategy is and how in practice many self-direct investors fail to actually do it. Well, one of the main reasons is the "what ifs."

What if I rebalance in the concentrated position, or the riskier stocks that I owned continue to go up? You could also ask yourself, what if you had just put all of your money into one of the top performing stocks of the past 20 years and what your portfolio would have grown to if you had? Well, then you should also ask yourself, what if I had put all of my money into one of the worst performing stocks over the last 20 years? And where would I be if I did that now? Don't play the "what if" game. You can drive yourself crazy worrying about things that are irrelevant.

Instead, you can feel confident knowing that you have a well-constructed long-term plan that gives you peace of mind in any market environment.

MIKE: Well, great suggestions, as always, Dan. Really enjoyed this conversation. Always love to connect with you. Thanks so much for making the time today to talk.

DAN: Thanks again for having me, Mike.

MIKE: That's Daniel Stein, branch manager for two Virginia branches of Charles Schwab. Dan's a great example of the talented people Schwab has in branches all over the country, and they're always available for a conversation about your portfolio.

That's all for this week's episode of WashingtonWise. We'll be back in two weeks with a new episode. Take a moment now to follow the show in your listening app so you get an alert when that episode drops and you don't miss any future episodes. And don't forget to leave us a rating or a review. Those really help new listeners discover the show. For important disclosures, see the show notes or schwab.com/WashingtonWise, where you can also find a transcript. I'm Mike Townsend, and this has been WashingtonWise, a podcast for investors.

Wherever you are, stay safe, stay healthy, and keep investing wisely.