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Reactive or Anticipatory Portfolio Decisions?

Reactive or Anticipatory Portfolio Decisions?

March 30, 2020
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In these unprecedented and volatile times, what decisions have you made with your investment accounts? Are you being knee-jerk reactive, or were you properly positioned for an event like this? The chaotic news headlines will read, “Buy this or sell that” with the additional conflicting commentary of, “This is a great time to buy” and “go to cash because this is getting worse.” It’s easy to get distracted in times of heightened volatility, due to an even greater amount of noise than our normal day to day. (I personally didn’t think more noise was possible)

Without a customized investment plan, poor decisions can and will be made. This is the precise time to get back to the basics and remember why you established that account in the first place. Was it for a down payment on a home in 2 years? Or for retirement in 25 years? The answer to these questions yields two very different portfolios. Hitting the frenetic pause button and reminding yourself of your initial Time Horizon and Objectives is paramount during events like this. If access to funds was imminent, then a very conservative portfolio, comprised of mostly fixed income would make sense. If your time horizon is 25+ years, let it rip and invest closer to a 100% stock allocation. Over long periods of time, stocks prevail over bonds. But in the short run, expect higher volatility from stocks than bonds. Additionally, this environment harkens to the prudence of having 6 months of living expenses set aside as cash reserves. You never know what curveball life will throw at you. I hope that’s a major takeaway for all of society.

If you were properly invested going into this, now is the time to take a deep breathe and know that, “This too shall pass”. The vicissitudes of this market have been more extreme than ever but maintaining perspective and riding it out are key. Always remember, investing is like a bar of soap, the more you touch it, the less you have! To bet against the markets eventually recovering is like betting against the progress of humanity. Stay Zen my friends.