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Tokenized shares in the mega-caps will first trade on Securitize’s Solana-based platform, with further plans to expand them to NYSE and OKXICE digital venues, the firm said.

As paper check usage continues to plummet, electronic checks (e-checks) have quietly become a workhorse of digital banking.

Powered by the Automated Clearing House (ACH) network, e-checks move billions of dollars annually for recurring bills, large purchases, and business payments.

While they offer steep cost savings over credit cards, they operate under fundamentally different rules than plastic. Knowing how e-checks work, and where their security gaps lie, is critical before linking your direct bank account.

What is an e-check?

An e-check is a digital payment drawn directly from a checking account through the ACH network. Instead of writing paper checks by hand, you provide your checking account number and bank routing number along with formal transaction authorization.

The merchant or payee processes this information electronically, pulling funds directly from your bank account. E-checks are commonly used for a number of regular payments including:

Mortgage payments

Monthly rent payments

Car loan repayments

Membership fees

Tax payments

Credit card payments

Utility payments

E-checks provide a more convenient way to pay versus a traditional paper check, but it’s important to consider both the benefits and potential risks of e-checks.

E-checks offer steep cost savings over credit cards, but operate under fundamentally different rules.Image source: Shutterstock

Key benefits of e-check payments

1. Lower processing fees

Credit card processing fees typically range between 1.5% and 3.5% per transaction. E-checks, in contrast, carry flat processing fees (often under $1.00 per transaction) or low percentages near 0.5% to 1.5%.

For high-ticket purchases — such as rent, tuition, or wholesale vendor payments — e-checks offer buyers and sellers substantial savings.

2. Enhanced security over paper checks

Paper checks are inherently vulnerable. They pass through multiple hands in the mail and explicitly expose account details written on paper.

E-checks substitute physical handling with 256-bit data encryption, tokenization, and digital authentication protocols, significantly mitigating physical theft risks.

3. Seamless automation for recurring bills

E-checks allow consumers and businesses to set up automated recurring payments for subscriptions, insurance policies, or mortgage payments.

Because checking account routing numbers rarely change (unlike credit card expiration dates and reissued card numbers), recurring transactions experience fewer administrative disruptions.

Hidden risks and drawbacks of e-checks

1. Processing delays and bounced fees

Unlike credit or debit card transactions, which approve or decline instantaneously, e-checks can take one to five business days to clear the ACH network.

If funds are lacking when the transfer settles, the transaction bounces, triggering overdraft or returned-check fees from both your bank and the vendor.

2. Strict limits on transaction reversibility

Under Federal Reserve Regulation E, consumers have protection against unauthorized electronic bank transfers. However, dispute resolution for an e-check is often far more burdensome than a credit card chargeback.

If you encounter a merchant dispute over service quality or non-delivery, reversing an e-check is difficult once the funds clear.

3. Direct exposure of checking funds

When an e-check process is compromised, fraudsters gain direct access to cash in your primary bank account.

Unlike credit card fraud, where disputed charges freeze the lender’s money, e-check fraud temporarily drains actual liquid savings until your bank resolves the investigation.

E-checks vs. credit cards vs. wire transfers

FeatureE-Check (ACH)Credit CardWire TransferSettlement Speed1 to 5 Business DaysInstant ApprovalSame Day / MinutesAverage CostFlat Fee ($0.20 – $1.50)1.5% – 3.5% FeeHigh Fee ($15 – $50)Fraud ProtectionModerate (Reg E)Strong (Zero Liability)Very Low (Irreversible)Ideal Use CaseRecurring bills, large purchasesEveryday retail, travelReal estate, high-value urgent wire

The verdict: When should you use an e-check?

Use an e-check for: High-dollar routine bills (rent, tuition, tax obligations, vendor payables) where credit card processing surcharges would add significant cost. E-checks also offer a way to avoid additional debt or interest payments since funds are pulled directly from your checking account. 

Avoid an e-check for: Transactions with unfamiliar online vendors, time-critical purchases requiring immediate delivery, or items where purchase protection and simple chargebacks are required.

Related: Bond ladders: how to build a stairway to stability

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Why we love this deal

Fall is the perfect time to try out a new hobby because we’re naturally inside more as the cold weather rolls in. Baking, reading, and crafting are popular pastimes for this cozy season, but learning to sew can be especially rewarding. Honing your sewing skills leads to so many possibilities. You can mend your favorite clothes if they ever get a hole, make custom curtains for the living room, or create costumes for the school play. Before achieving any of these feats, you need to learn the basics of the craft, and that starts with a sewing machine.

Learning to sew, like any new hobby, can be expensive, and you shouldn’t splurge on a high-end sewing machine until you’ve mastered the basics. The Bcooss Beginner’s Sewing Machine is a great starter machine, and it’s shockingly affordable during Walmart Deals. Originally priced at $80, you can now score the lightweight machine for just $35. Along with the machine itself, you’ll also get a 42-piece sewing accessory kit that has everything you need to get started, like bobbins, thread, a seam ripper, and a thimble.

Bcooss Beginner’s Sewing Machine, $35 (was $80) at Walmart

Courtesy of Walmart

Shop at Walmart

Why do shoppers love it?

Smaller than a standard sewing machine, this lightweight selection has a built-in top handle, so you can carry it wherever you want to get to work. While it plugs in like a traditional unit, you can also opt for battery-powered operation if you’re not near an outlet for added convenience. There’s even a built-in LED light to help brighten up your workspace if you’re in a dark area. Despite its small frame, it has plenty of power to work with thicker materials, like denim or plush cotton. “This little bitty machine is an absolute beast,” wrote one shopper. They explained, “It has been reliably sewing through multiple layers with no issues.”

Related: Amazon’s $49 farmhouse quilt set has a silky-smooth microfiber shell

If you’ve never sewn before, this sewing machine offers user-friendly features for beginners. It has 12 stitching patterns, which you can easily select by rotating the front dial. The variety of stitches allows you to do all kinds of projects, whether quilting, crafting, or hemming pants. Threading the needle is often the hardest part of starting your project, and this machine has simple-to-follow guidelines printed directly on it for a helpful reminder. 

Details to know 

Dimensions: The sewing machine measures 10.8 inches long, 4.8 inches wide, and 10.2 inches tall. 

Weight: The portable sewing machine weighs 5.5 pounds.

Extras: The sewing machine comes with an accessory kit that includes bobbins, thread, needles, scissors, a threader, a tape measure, a seam ripper, buttons, and a thimble. 

The convenience of this machine isn’t limited to first-timers. Many reviewers indicated they had previous experience sewing and were still impressed with its performance. One reviewer raved, “Plugged in the power and gave it a go – works like a dream! Beats my old Singer from 20 years ago.”

Shop more deals

Fixdono Mini Sewing Machine, $20 (was $40) at Walmart

Singer 3337 Special Edition Blush Sewing Machine, $135 (was $180) at Walmart

Brother Computerized Sewing and Quilting Machine, $225 (was $250) at Walmart

If you’ve been wanting to test out your sewing skills, the Bcooss Beginner’s Sewing Machine is a user-friendly machine that even beginners can appreciate. Add it to your cart while it’s still available for only $35.

There’s an agent arms race unfolding, supercharging the battle for your wallet

Bill Hench, of First Eagle, stepped away from the artificial-intelligence trade with small-capitalization bets on a recovery of the U.S. housing construction market.

On Tuesday, Oct. 6, 2026, Alphabet (GOOGL) signed a 20-year power purchase agreement with Constellation Energy (CEG) to support 890 megawatts of new nuclear output from upgrades to 11 existing reactors, according to the company’s announcement.

Seeking Alpha called it the largest uprate deal ever between a nuclear provider and a tech company.

Constellation shares jumped 12.2% on the news, Seeking Alpha reported. The price pop is the least interesting part. Google signed before the region’s data center power rules are final, and that timing tells the actual story here.

Read more: U.S. loaning $4.2 billion to energy firm with crashing stock

Uprates turn old reactors into new supply

An uprate swaps in newer, more efficient equipment so an already licensed, grid-connected reactor produces more electricity.

Seeking Alpha noted that the 890 MW addition is roughly equal to building a large new reactor. The difference is speed, since an uprate skips the site hunt and the grid connection queue.

Constellation will back the work with more than $4.3 billion in new investment. Google also signed a separate long-term deal for 2,700 MW from Constellation’s existing plants, Reuters reported, so roughly three-quarters of the 3,590 MW package pays for reactors already running.

For shareholders, that is locked-in revenue on today’s fleet, not just future growth.

Six days earlier, Constellation signed a 20-year deal with Amazon (AMZN) to support expanding its Calvert Cliffs plant in Maryland, Reuters reported.

Two hyperscaler deals in a single week suggest uprates have become a product Constellation can sell on repeat.

Constellation will invest more than $4.3 billion to add 890 MW of nuclear output at 11 existing reactors under a 20-year power deal with Google.KE ZHUANG / Getty Images

Google is buying its way around a grid rule fight

PJM Interconnection, the grid in question, has proposed that data centers on its 13-state system either bring their own power or face remote shutoffs during peak demand, according to Reuters. Google and Constellation said their agreement answers that proposal.

Constellation laid the groundwork months ago. In first-quarter materials filed with the SEC on Monday, May 11, 2026, the company argued that direct contracting lets large customers “contract for desired products quickly” and control their own cost allocation.

The same filing said Constellation had submitted 5,000 MW of new capacity to PJM, with nuclear uprates on the list.

KeyBanc analyst Sophie Karp sees the deal as proof that the strategy works. Constellation’s growth opportunity is “driven by its ability to strike commercial deals, not by political debates and outcomes,” she wrote in a note cited by Seeking Alpha.

Karp called it “high-quality, low-risk growth,” while conceding that market reforms remain “an overhang on the sector.”

Constellation stock still trades far below its record

Constellation sells electricity from a fleet anchored by nuclear plants. That makes its stock one of the most direct public bets on AI-driven power demand and among the most exposed to swings in grid policy.

Shares closed at $300.40 on Tuesday, Oct. 6, 2026, after touching $309.80 intraday, according to StockAnalysis. Volume reached about 13.2 million shares, roughly three and a half times the 20-day average, the site’s data show.

Even so, the stock sits about 27% below its all-time high of $412.70, set on Wednesday, Oct. 15, 2025, StockAnalysis confirmed. That record doubles as the 52-week high, while the 52-week low of $228.63 came on Wednesday, July 1, 2026, leaving shares about 31% above that trough.

Buyers near the all-time low of roughly $40 in early 2022, after the Exelon spinoff, remain up more than sevenfold, the site’s price history shows.

Wall Street remains constructive. Of 22 analysts tracked by StockAnalysis, 19 rate the stock a Buy or Strong Buy, and three rate it a Hold, with no Sells.

Their average price target of $341.53 implies about 14% upside, the site shows, well short of the 2025 peak. Scotiabank trimmed its target to $355 from $441 on Wednesday, Oct. 7, 2026, while keeping a Buy rating, according to StockAnalysis.

Bulls are pricing in a recovery, not a return to peak valuations.

More Energy Stocks:

JPMorgan strongly recommends buying tumbling energy leader

Wolfe Research sees nearly 100% upside in crashing energy stock

Morgan Stanley spots 3 game-changing Bloom Energy opportunities

Existing reactors are becoming the grid’s scarcest asset

The rally spread fast. Talen Energy (TLN) rose 12.4% and Vistra (VST) gained 10.7%, according to Seeking Alpha. Fuel supplier Centrus Energy (LEU) added 8.8%, the outlet reported. That makes sense, since uprated reactors burn more fuel.

The bigger shift is that tech companies now finance grid capacity directly instead of waiting for regulators to settle who pays. PJM’s final bring-your-own-power rule will show whether these private deals become the default route for data center supply.

Constellation’s next earnings report, expected on Friday, Nov. 6, 2026, should reveal how many uprate megawatts it still has to sell. America’s next big source of new power may be plants that already exist.

More Stocks NewsDraftKings gets upgrade as a feared threat becomes an edgeNvidia, Palantir, and Alphabet send waves through Wall StreetStock Market Today (Oct. 8, 2025): S&P 500 futures fall on surging oil prices, Treasury yieldsBank of America sees Asia FX split as $100 oil meets chip boom

Hurricane Isaias has formed and is making the turn towards the U.S. Here is the latest information on the storm, potential impacts on gas prices and a bit of history too.

The Chicago Cubs’ Swiss Army Knife left the organization shortly after a very disappointing playoff exit.

Record-high stocks can make a portfolio feel safer than it is. Investors who have benefited from an S&P 500 index fund, technology stocks, or the artificial-intelligence trade may be sitting on meaningful gains, but Nick Lumpp, president of RCN Wealth Advisors, argues that those gains can mask a market increasingly prone to abrupt reversals.

Lumpp, a fiduciary and ETF manager with 13 years of market experience, sat down with TheStreet’s Caroline Woods to explain how his systematic, trend-following investment approach attempts to ride upward momentum while minimizing the effects of market downturns.

His concern is not that a selloff is certain or that stocks have already reached a peak. Instead, he worries that the combination of late-cycle economic risks and changing market structure could make a future downturn sharper than investors expect.

For individual investors, the practical question is less about predicting the precise date or depth of the next decline and more about deciding how much downside they can live with before it arrives.

Lumpp’s process centers on rebalancing concentrated winners, holding assets that may behave differently from stocks, and using a rules-based approach to determine exposure to market trends without relying entirely on judgment. His strategy doesn’t fit every portfolio, but it offers a useful framework for thinking about risk after a long run in stocks.

Here is how Lumpp sees the current market’s risks, the role of gold and bonds in a defensive portfolio, and the trade-offs investors should weigh before changing their portfolio composition.

Why passive index investing can magnify stock-market swings

Lumpp’s starting point is a structural argument about passive index investing. When money flows into an index fund, he said, the fund must generally buy the securities represented in its benchmark.

In his telling, persistent inflows can reduce the supply of shares available to other buyers and sellers, helping reinforce an advance. The same dynamic can become uncomfortable when money starts flowing out, and investors rush to sell.

This viewpoint helps explain why an investor should look beyond economic data and corporate earnings when assessing portfolio risk. A market can be affected by how money moves through funds, derivatives, and trading strategies, as well as by the underlying businesses.

Because by mandate, an index fund can’t sell unless they have redemptions or outflows. So every week, every month that we have constant inflows in, they just keep pulling more shares from the market.
Nick Lumpp, when asked why he believes investors should become more cautious near record highs

Lumpp also pointed to stock options, CTA strategies, and leveraged ETF products. A CTA, short for commodity trading advisor, is a manager who often uses systematic rules to follow market trends. Leveraged ETF products seek to amplify the daily move of an underlying market or stock. Lumpp said these tools can add to volatility when trends accelerate in either direction.

His concern is not limited to a normal correction, which typically means a 10% decline from a recent peak. He said that if selling begins to build across these market mechanisms, a decline could be deeper than a standard correction. Lumpp explicitly declined to make a hard forecast about the size of any decline, citing uncertainty around economic conditions, the midterm elections, and other variables.

How investors can prepare for a possible market downturn in 2027

Lumpp sees signs of a late-cycle environment, including tighter financial conditions and the possibility that economic data could slow into 2027. He also said the pace of growth in the AI story appears to have slowed during the summer.

Those observations led him to say that RCN Wealth Advisors is preparing for a potential move lower in the first half of 2027, while stressing that he was not calling the market’s top in October 2026.

That distinction matters. Investors who need money soon have a different problem from long-term, buy-and-hold investors who can tolerate a drawdown. Someone saving for a near-term goal may need to reduce the amount of stock-market risk in their portfolio.

A long-term, buy-and-hold investor may decide that staying invested remains appropriate, but they should still understand whether recent gains have left their portfolio more concentrated than intended.

Lumpp listed several ways investors can reduce risk: Rebalance by trimming positions that have grown too large, lock in a portion of gains, hold more cash, add assets that are less correlated with stocks, and use hedges. Rebalancing does not require a prediction about tomorrow’s market direction. It means restoring a portfolio to the mix of stocks, bonds, cash, and other investments an investor originally intended to own.

A hedge is a position intended to offset some losses elsewhere in a portfolio. Non-correlation means two investments do not reliably move in the same direction. Neither is a promise of protection. Assets can become more correlated during periods of stress, and any hedge can carry its own costs or risks. The goal is to avoid depending on a single market outcome.

How systematic trend following tries to limit left-tail risk

Lumpp’s preferred approach is systematic trend following, a rules-based method that seeks to remain invested while a market trend is rising and reduce exposure after that trend reverses. Rather than asking a manager to decide each day whether stocks are attractive, the strategy follows predetermined signals. In simple terms, the rules are meant to tell the investor when to remain in a position and when to exit it.

The appeal is clearest for investors worried about left-tail risk, the possibility of an unusually severe loss that sits at the far negative end of potential outcomes. Lumpp said a systematic approach can help investors participate in an uptrend while creating a defined process for responding when the trend weakens.

It cannot eliminate losses, and it can be late to recognize a reversal. A quick decline followed by a quick rebound can also produce a costly exit and reentry cycle.

When things are working and they’re building to the upside, you want to jump on that trend and you want to ride it as long as it goes. But if and when that starts to reverse, you want to exit and hopefully avoid as much of the downturn and the unwind as you can.
Nick Lumpp, when asked how systematic trend following can help manage downside risk

Lumpp said the PRTO Strategic Allocation ETF that he manages applies this approach across several asset classes, including large-cap stocks, small-cap stocks, Treasury bonds, and gold. He described the ETF as a tactical asset allocation fund, meaning it can serve as a portion of a broader portfolio that adjusts exposure as conditions change. He also said some more conservative investors could use it as an equity replacement because the fund generally has roughly 70% equity exposure when stock-market trends are favorable.

The fund’s flexibility is part of its case and part of its trade-off. Lumpp said the PRTO Strategic Allocation ETF can reduce stock exposure to 0% when its trend signals turn off. That may help during a sustained decline, but it also means investors can miss gains if the market turns higher after the fund has moved defensively.

Investors considering an ETF should examine its strategy, holdings, fees, and fit with their existing portfolio rather than assume that a systematic label makes it appropriate.

Why the PRTO Strategic Allocation ETF holds small caps

One counterintuitive feature of Lumpp’s approach is its substantial small-cap exposure. Investors often think of small caps as economically sensitive companies that may struggle when growth slows. Standard portfolio construction also often gives large-cap stocks a larger weight because large caps tend to be less volatile.

Lumpp’s argument is that a systematic trend-following strategy changes that conventional calculation. Small caps have historically been more volatile than large caps, he said, with larger gains during bull markets and bigger losses during bear markets.

In Lumpp’s view, the greater movement can make trends easier for a rules-based system to identify and follow. That does not mean small caps are automatically defensive or that they will outperform during an economic slowdown.

When you apply a systematic trend-following approach, it kind of distorts the return and volatility profile of the asset class. And so the more volatile an asset is, the better it works to use a trend following approach.
Nick Lumpp, when asked why PRTO Strategic Allocation ETF had more small-cap exposure than large-cap exposure

Lumpp said the fund remained invested in small caps at the time of the interview because their recent trend had stayed positive. He also said deteriorating market breadth, meaning fewer securities are participating in an advance, could be one factor that leads the strategy to reduce or exit the exposure. That condition-based approach is central to the fund’s thesis: Own an asset while its trend remains intact, then change the position if the evidence changes.

When gold may diversify a stock portfolio better than bonds

Gold is another major part of Lumpp’s portfolio view. He said PRTO Strategic Allocation ETF had nearly 19% of its portfolio in gold across two gold ETFs at the time of the interview. This figure describes his fund’s holdings, and it’s certainly not a recommended allocation for every investor. A portfolio’s appropriate gold exposure depends on its time horizon, income needs, other holdings, and tolerance for volatility.

Lumpp framed gold in three ways. Over many decades, he said, gold tends to keep pace with purchasing power. Over intermediate periods, he said gold can move in longer waves influenced by inflationary and disinflationary conditions. In the short term, he described gold as a measure of financial conditions, which can be affected by changes in interest-rate policy.

The more distinctive part of his argument is gold’s relationship with bonds. Bonds are widely used to diversify stock exposure because they can (but don’t always) rise when stocks fall. Lumpp said that this relationship can change during periods of higher inflation, when bond investors demand higher yields and stock and bond prices can decline together, as occurred during 2022.

Lumpp said core CPI above roughly 3% to 3.5% has tended to coincide with a less useful stock-and-bond diversification relationship. He argued that gold can be a more effective portfolio hedge during a structurally higher-inflation environment. He also said gold had performed significantly better than long-term Treasury bonds over the prior six years, though he did not provide specifics.

Investors should be careful not to turn that view into a permanent rule. Gold does not produce income, can experience long stretches of disappointing performance, and may respond differently depending on interest rates, the dollar, inflation expectations, and investor demand. Bonds also remain important to many investors because of their income potential and their role in meeting planned spending needs.

How long-term, buy-and-hold investors can review concentrated gains

For long-term, buy-and-hold investors, Lumpp’s warning does not necessarily point to selling all stocks or abandoning passive index investing. It points to a more basic review: Has a strong run in VOO, technology stocks, or AI-related investments changed the portfolio’s risk level? A position that began as a modest allocation can become a dominant one after a large rally.

Lumpp’s rapid-fire responses reflected his preference at the time of the interview. Asked whether investors should buy stocks immediately or wait at record highs, he said to wait. He favored holding cash, chose bonds over stocks for the next 12 months, said to buy gold, and called the traditional 60/40 portfolio outdated. Those are personal allocation views, not universally applicable instructions, and the rapid-fire format did not include the reasoning needed to make them stand-alone recommendations.

His broader point was more durable: Risk management should be tied to an investor’s timeframe. A person who expects to use money soon may reasonably prioritize stability over maximizing stock exposure. A long-term, buy-and-hold investor can focus on diversification and periodic rebalancing rather than trying to trade every warning sign. Investors who own concentrated positions may also want to consider whether a decline larger than a routine correction would force an unwanted sale.

The takeaway for investors near record-high stocks

Lumpp’s case is not a prediction that a 2027 selloff will happen, nor is it evidence that every investor should move into cash, gold, or a tactical ETF. His case is that recent stock-market gains have arrived alongside market forces that could amplify a reversal, and that investors should consider their downside plan before they need it.

A useful decision procedure starts with three questions. When will you need the money? How much of your portfolio now depends on continued gains in the same stocks or sectors? And what change, if any, would you make if markets fell sharply? If the answers reveal a portfolio that is more aggressive or more concentrated than intended, rebalancing may be more useful than a dramatic market call.

For investors who want a tactical strategy, the next step is to understand the rules, the asset exposures, and the possibility of missing a rebound. For long-term, buy-and-hold investors, the next step may be simpler: Maintain a diversified allocation that matches their time horizon and revisit it after large gains.

The right response to market risk is rarely a single asset or a single forecast. It is a portfolio plan that an investor can follow when conditions change.
Some or all of this content may have been generated by AI. While we strive for accuracy, AI can occasionally produce incorrect information. If you buy something via one of our links, we may earn a commission.

Third of a four-part series

John Nersesian remembers the $3,000 limit on deducting net capital losses against ordinary income from the year he graduated from Lehigh and began paying taxes. In his interview with me, he pointed to the same dollar limit decades later.

But that limit is only part of his portfolio discussion. Nersesian, the founder of Nersesian Wealth Education, also described how losses can offset capital gains and why investors sometimes need to sell investments that have performed well to restore the portfolio they intended to own.

Below is a transcript of the interview with Nersesian, edited for brevity and clarity.

What can investment losses accomplish at tax time?

John Nersesian: Nobody likes to invest in a losing strategy, but if you have unrealized losses, they can provide an ancillary benefit.

We start first with short-term transactions. We net out our short-term gains and losses. We then move on to our long-term transactions, taking long-term gains against long-term losses for a net long-term position.

The third step is to pull the two together, to take our net short-term transactions against our net long-term transactions. Losses can be used dollar for dollar to offset gains.

If you have additional losses above and beyond, you can use all of $3,000 of any net loss against ordinary income. I have a bone to pick with the IRS. You want to know what it is?

Bob Powell: I do.

Nersesian: I started paying taxes in 1981. I graduated from Lehigh back then. Do you want to guess the maximum amount an individual could take off ordinary income for any of these losses? It was $3,000.

Here we are, 45 years later, and the number is $3,000.

Why review wash-sale rules before harvesting losses?

Nersesian: When an individual does book a loss to offset gains, they’ve got to be aware of this wash-sale rule.

How can market performance change a portfolio’s risk?

Nersesian: I meet with my adviser, and we talk about our intended strategy. Maybe we wrote an investment policy, and we take a look at where we are today.

Maybe my equity portfolio has done really well. Maybe my fixed-income portfolio has done less well. Now the current holdings are out of alignment with my original policy.

There may be a reason to retain the current exposure, or I may want to rebalance. Rebalancing forces us to do what is emotionally difficult but often financially productive.

Related: The year-end RMD trap: Why waiting until late December could cost retirees 25%

Rebalancing requires you to sell what has already appreciated and reallocate those dollars into assets that have performed less well. The biggest benefit is that it avoids drift: an exposure that was never intentionally sought but may subject our clients or our friends to greater downside risk.

Why can rebalancing feel wrong after market losses?

Nersesian: I’ll give an example going back to 2008. An individual started with a million-dollar portfolio allocated across five core strategies: growth stocks, international, fixed income and so on.

By Dec. 31, the portfolio looked very different. It was down in value, but look at the mix and how it drifted. What started as 70-30 stocks to bonds turned out to be 58-42. The equity portion was lower; the fixed-income portion was higher due to market returns.

I don’t know too many people who went to their advisers at the end of the year, after suffering those significant losses, asking their adviser to buy them more equities.

It would have been counterintuitive for that individual to allocate more money to equities, but that’s exactly what rebalancing would have done.

Powell: It’s an inelegant way of saying it, but sometimes people refer to rebalancing as selling your winners and buying your losers.

Nersesian: If anything, the individual probably would have asked to reduce their equity exposure because of the pain they had just endured. Maybe the greatest benefit of a formal rebalancing approach is that it instills discipline in an emotionally charged world.

How can a written investment policy guide decisions?

Powell: It bears repeating: creating an investment policy statement would take the emotion out of this and guide you. We agreed what our allocations should be. That’s our plan, and we stick to it.

Nersesian: There are two important steps. The first is writing that policy statement or plan. The second is adherence to it, utilizing it after it’s been created. That’s what a great adviser can help you with.

Related: The “Gap Year” Roth: Early retirees slash lifetime taxes before RMDs hit