Rollercoaster returns got you queasy?

Natalie Schmook

August 11, 2019

Even if you don’t watch CNBC, it’s hard to ignore the recent news about trade wars and how they might impact the US economy. If you kept up with the markets last week, by Wednesday, it looked like the US market was going to have a very bad week (spoiler alert—the S&P 500 and Dow Jones Industrial Average both ended Friday afternoon higher than they began Monday morning). Then there’s the big picture: we’re 10 years into what is typically a 7-year positive economic cycle. Is it all about to fall apart?!

Before you go sell everything and buy gold (please don’t), think of your practice: do you close shop when there’s an economic downturn? Of course not!

You should view your investment portfolio in a similar capacity to your practice, but for different reasons. The most important one is that there are no crystal balls. There is a reason everything investment related has a disclosure that says “past performance is not a guarantee of future results.” No one knows exactly when a recession is coming. If you liquidated your equities 3 years ago when that 7-year expansion period typically ended, you would have missed out on a 22.72% cumulative return from the S&P 500 between 1/12016 until 12/31/2018. As attractive as it seems, timing the market is almost impossible, even for professionals.

So what CAN you do to protect your investments?

First, make sure your portfolio is diversified between large cap, small cap, international, and fixed income in a way to meets your long-term objectives and risk tolerance. Think of an investment account with just large cap growth names like Amazon, Apple, and Alphabet (Google) like a bi-polar patient: when you average out their moods, they are fairly normal, but with really high highs and really low lows along the way. Diversifying among asset classes can help calm the mood swings and avoid a classic investment mistake: buy high sell low.

Next, implement a disciplined and systematic approach to that diversification by rebalancing your portfolio (or at least looking at your ranges to see if it makes sense to rebalance). I suggest this be done quarterly. When implemented in a consistent, unbiased manner this approach should result in a natural way to sell high buy low.

If you're uncertain if your portfolio is correctly allocated, not sure how to rebalance or have general investment questions or concerns, feel free to reach out to me to discuss HERE.

Finally: take the long view. Markets go up and down. Portfolios will too. I highly suggest avoiding the media—bad news sells a lot better than good news. Treat your portfolio like your practice: structure it correctly, execute in a consistent, disciplined manner, and be patient.

FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY.

The views expressed here are as of the date of publication and are subject to change. This information should not be construed as investment advice. It is presented for information purposes only and is not intended to be either a specific offer (or recommendation) Hayes Wealth Advisors to sell or provide, or a specific invitation for any investor. Information herein may have been obtained from sources believed to be reliable, Hayes Wealth Advisors is unable to warrant its accuracy.

All data, projections and opinions are as of the date of this report and subject to change.

Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.

Hayes Wealth Advisors does not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. All recommendations must be considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be suitable for all investors.

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