Dow +1173 Wednesday, but today....
The question some have asked the last week or so is: Should I get in or out of the market; is there any way I can protect my money? What is going to happen? Is it going to get worse? Will the market go lower?
The answer: In the short term, I have no idea. Wait, what? That’s right. I have no idea what the market will do in the short term. But I’ll let you in on a secret. No one else in my profession does either. That’s the unvarnished truth. Many will give you a prediction because that’s what’s expected. They’ve been conditioned by society that they must have an intelligent sounding answer to this question. They may even say “we’re going to de-risk” or “take some money off the table” and use lots of technical investment jargon. They’re guessing, and they’re probably going to lose your money, not protect it. They think they must “do something”. It’s difficult to do nothing, but that’s almost always the right thing to do at times like these. You see, the market has always come back up. If you look at the long-term history of the market, it’s true. Even in 2009, when it seemed so, so bad. Those who “lost” either bailed out or weren’t properly diversified. Bottom line: If you get out of the market or move money to cash, you just might miss the boat. Then what?
Here’s the deal. Based on long-term market history, people who stay invested in an appropriately diversified portfolio, are compensated by the market for enduring its fluctuations. These ups and downs are much, much easier to handle if you have a plan. With my clients, I use some really great interactive planning software that helps them visualize the effects of the fluctuating stock market on their retirement lifestyle.
Using the software, we examine the allocation of the investment portfolio and its historical range of positive and negative returns over very long time periods. Combining this with all the client’s other factors, such as: current account balances, future contributions, retirement expenses, social security, future inflation, etc; we arrive at a “confidence level”. A confidence level in the high 80s means, though we may be concerned, COVID-19 or similar scenarios, will not have a dramatic impact on our long-term financial situation.
At times like this you need to worry about having enough hand sanitizer, not the fluctuating balance of your investment accounts. When this thing subsides, go make a plan for your money. Better yet, start today:
Oh, and I almost forgot…the legal disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All performance referenced is historical and is no guarantee of future results.
All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.
Diversification does not protect against market risk.