At the risk of appearing sarcastic, cavalier and perhaps insensitive, I say whoop-dee-doo!
The title of this column is 100% true and 100% irrelevant albeit with one caveat; that one is properly diversified (stocks, bonds, cash and real assets) based on his or her risk (volatility) tolerance. Please keep in mind that diversification is employed to help reduce risk not to increase return.
Now that we got that out of the way, I would like reiterate my position that a stock crash is coming and there is and will continue to be news to support my position. Therefore, given my forecast, would it be prudent to reduce some of our stock exposure now and then buy back when prices are lower? I hope you are rolling your eyes in disbelief at my suggestion. If not, you should, because nobody and I mean nobody knows when the next so-called crash is coming, so don’t even think about playing the market timing game.
Disrupting one's diversified portfolio because of a concern about a stock decline has proven to be a failed experiment for so many that try to time the market. However, there is always a good case for “rebalancing” from stocks to bonds. For example, if an investor starts her portfolio with 60% in stocks and 40% in bonds and the stock market increases in value while bonds decease, she might find herself with 70% in stocks and 30% in bonds. So, she could sell stocks and buy bonds, thereby restoring her portfolio to her original asset allocation.
During my 36 years as a financial advisor, I have repeatedly urged clients to “stay the course” during times of market turmoil. By following my advice, at times, we saw our portfolio’s decline in value over many months while we journeyed through the storm.
The pain and frustration were, of course, unnerving. It was scary. It was disturbing, but in the end, history has proven time and time again, stocks recovered and so did our portfolio.
Far too many folks make investing too darn difficult. Successful investing is about fundamental principles; diversification, discipline and the value of experienced guidance.
I believe from the depth of my being that if we adhere to the following simple (not easy) four step investment doctrine all will be well in the end.
The takeaway message is to stay the course. In other words, don’t do something, just stand there.
Harry Pappas Jr. CFP®
Managing Director-Investments
Master of Science Degree Personal Financial Planning
Certified Estate & Trust Specialist ™
Certified Divorce Financial Analyst™
Pappas Wealth Management Group of Wells Fargo Advisors
818 North Highway A1A, Ste. 200
Ponte Vedra, Florida 32082
904-273-7955
harry.pappas@wellsfargoadvisors.com
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