How Would You React Tomorrow If You Didn’t Act Today?
What if you already knew the market’s future? Would you choose to make some changes today rather than be in a position where you wished you’d have done something different?
During this time in our market, I’m reminded of when I look at my child and smile because I know something is ahead for them. Have you been there too? You know their actions have led to a certain outcome and you smile as you anticipate their response? Hopefully this happens more on pleasant occasions rather than negative.
As adults, we know this does happen on a fairly frequent basis with our kids. But does it happen for us now that we are older? And more specifically does it happen when you’re investing?
In order to keep us from facing negative outcomes when investing we do a variety of things:
1. Keep a diversified portfolio.
This means that you have investments in a variety of asset classes not just everything in one place. You keep a variety of cash, bonds, stocks, commodities. And within the stocks that you own you hold a variety of companies over a wide span of industries and countries. Perhaps you’ve heard it said that keeping a diversified portfolio means always having to say you’re sorry.
For example, when the market is performing well, as it has for a strong ten years now, then holding something like gold hasn’t always been performing well over that same period. But recently gold has started performing well again! You see, they take turns outperforming at various times.
2. Maintain a barbell strategy
Specifically, in investing with bonds there is a strategy known as the barbell strategy. This simply means that you own some short-term and long-term bonds to balance. You benefit from different characteristics of each length of maturity to help your overall portfolio.
3. Reassess your time horizon
Given the recent volatility and the items that the market is looking for answers on, we do believe some changes are necessary. If you’ve been putting everything into stocks and pushing your risk level it could be time for you to adjust those gains back to provide some diversification.
We hope you choose to take a step during this high season rather than be in a position where you’d look back and react.
Wondering how this affects your investments? Schedule a call with Michelle and Steve to discuss your portfolio today.