While the past seven years have been a relatively smooth ride for the markets, the past couple of months have been more like riding on a roller coaster.
Market volatility such as this can present challenges for investors. Without a clear direction up or down, investors have trouble deciding how and where to invest their money. Some are looking for security and moving their money back into cash and bonds while others are using the down days as opportunities to buy into stocks.
Sage Advice – The average investor will find that the old advice could still ring true. Most have heard of buying low and selling high, staying invested for the long-term, and diversifying. While these are wise ideas, following this advice doesn’t mean that you have to stay paralyzed like a deer in headlights.
A Fresh Take: Over the past seven years a handful of stocks have generated most of the returns within the S&P 500. As a result, many investors have concentrated their portfolios. Just because diversification hasn’t been working during the recent calm market run, doesn’t mean it won’t help in times of volatility.
This may be the time for a change. Review your investment portfolio to see if there are any opportunities for adjustment to your allocation. First, you may want to pare back some of your investments in those investments that have been outperforming and use the proceeds for something else. By making changes such as this, you’re effectively selling the investments while they are higher than what you paid and buying other investments while they are lower than where they recently traded.
Second, you may want to look for opportunities in sectors and asset classes that you haven’t been utilizing. Many people have some money invested in stocks of large companies but have little in medium, small, or international businesses. When it comes to fixed income, many people have US Treasuries and corporate bonds but have neglected to add international bonds to their portfolio. You may want to consider other fixed income sources as well, such as convertible bonds or inflation protected bonds. Making these changes could allow you to better diversify your portfolio.
Third, other investment vehicles could possibly benefit your portfolio. Try to find something that acts differently than traditional stocks and bonds such as real estate, commodities, or currencies.
All three of these ideas still enable you to be invested for the long term. There may be other ideas that would be appropriate for your portfolio based on your specific risk level and objectives. See a financial adviser to help determine what is appropriate for your situation.
- Throughout my nearly 20 years as a Financial Advisor, I have seen some of the best and worst markets in our history. That experience allows me to approach my clients with the knowledge of how the markets fit into their greater financial picture. At Partnership Wealth Management we help everyday people who have accumulated wealth make sense of what they have and work with them to maximize their financial opportunities in a relaxed, comfortable, and professional environment. While we help people from all walks of life, many of our clients are same-sex couples searching for a knowledgeable, LGBT-friendly financial advisor to help them with their unique financial planning needs. I am a CERTIFIED FINANCIAL PLANNER™ professional and have the Accredited Domestic Partnership Advisor(sm) designation. As a Registered Investment Advisor, we are not tied to any company’s investment products allowing us to provide unbiased advice by offering a wide array of investments and other products to our clients. Since 2001, I have been writing articles on financial planning for several regional newspapers and have been a guest speaker on LGBT financial issues for various local and national organizations. Additionally, I have conducted financial planning workshops for large corporations and government agencies. Non-Profit Work I believe that it is important to give back to the community and currently serve as the treasurer for FreeState Justice and as a co-founder/president of Paws for a Cause. I’m a current member of several LBGT, environmental, and local community groups. Personal My wife, Heidi and I enjoy camping, hiking, and traveling with our daughter, Elise, and our dogs, Fenway & Roxy. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.