The return of volatility this year has brought opportunity—the opportunity to tactically increase allocations to an oversold asset class. This selloff has advisors and clients discussing how to nimbly take advantage if another correction looms. Before eyeing that entry point into a riskier asset class, however, advisors face a conundrum: How can they add a riskier — albeit attractively valued — asset class without upsetting the portfolio’s long-term risk profile?

Like a popular diet plan, the term “risk-budgeting” is often discussed, and generally understood, but rarely followed in practice, it seems. However, just as Father Time will wield his will on all of our metabolisms, the markets will not be as forgiving at some point in the future…maybe even soon.

One of my favorite movies as a kid was “The NeverEnding Story.”  As a nerdy book reader then (and now, for that matter), I could see myself as Bastien as he immersed himself in the land of Fantasia and Atreyu’s quest to defeat The Nothing—the threat to make everything nonexistent.

I recently watched it again and it got me thinking about what some of our advisors are currently dealing with.  We are in the eight year of an equity rally that, aside from a few hiccups, has had minimal declines (markets are supposed to have at least one 20% drawdown every four to five years, and domestically we’ve had zero since the bottom in March 2009).

It’s not enough to have a plan; you have to follow through.

Recently, I was hiking with my family in the mountains a couple of hours west of Denver. During the hike, we were crossing a stream, and in my attempt to help my daughter across, I slipped and came down hard on a pile of rocks. Upon inspection, it was only a surface-level injury, something that I could easily patch up with my first-aid kit—which was in my car about five miles away. I was prepared in that I had thought to purchase a first-aid kit, but I had failed to actually put the kit in my backpack. Preparation without full implementation isn’t particularly useful.