Consider The Economic Cycle
Deciding how to invest a portfolio starts with where we believe we are in the economic market cycle. Many well respected analysts believe the market potentially has another year to run and keep moving higher with a potential late 2018 or 2019 pullback where we could see a recession. So believing we are in the later stages of a bull market or expansion of the economic cycle should you be making changes to your investments?
Historic Economic Cycles
Many people are trying to time the final day of the boom or peak, but this is a great reminder to stay diversified for the longer term. History has proven that economic cycles come and go. Here is a chart showing historical economic cycles and the length they lasted (in grey).
Depending on your time horizon to reaching certain goals you may need to update your risk tolerance and make changes in your portfolio. For example, if you will be retiring in the next few years you may not be as comfortable riding through another recession with no portfolio changes, like you were when you were younger.
What Is Your Risk Tolerance?
If you are younger with many years to invest before needing to use the funds you are saving for retirement then you may be able to stick through more economic cycles. Changing your portfolio due to a higher risk tolerance and time for the market to perform may not be as important.
More important than knowing where we may be in an economic cycle is understanding where you stand with your goals. You have to understand where you want to be and what goals you are reaching toward before you can set a plan to get there.
What This Means To You
Regardless of the economic cycle we are in continue saving toward your goals. The growth of what you’re saving will be important when the time comes to realize your dreams. If we can be helpful in designing your plan please reach out to get started!
Photo Source: https://commons.wikimedia.org/wiki/File:Economic_cycle.svg https://www.schwab.com/resource-center/insights/content/are-bonds-signaling-a-major-stock-market-peak
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Will 2023 be better for investors? They just suffered one of the worst investment years ever in 2022. There are reasons for hope in certain parts of the stock and bond market. We give our thoughts on the chances of a recession and path of interest rates in this opening post of 2023.
We are financial advisors in Deer Park and Barrington, IL. A team with a passion for helping others design a path to financial success — whatever success means for you. Each of our unique insights fit together to create broad expertise, complete roadmaps, and creative solutions. We have seen the power of having a financial plan, and adjusting that plan to life. The result? Freedom from worrying about the future so you can enjoy today.