By Kristin Hovencamp
Twentieth-century economist John Maynard Keynes observed, “Markets can remain irrational for longer than you can remain solvent.” In 1996, then-Federal Reserve Chairman Alan Greenspan suggested: “irrational exuberance” affects asset values. Today’s markets have rallied and tumbled, reminding investors that we cannot “talk markets down,” nor can we accurately time them.
Whether you are growing your wealth or preserving it, here are practical investor coping strategies for today’s market environment.
Remind yourself why you decided on your current financial plan and investment portfolio.
Take a deep breath and wait until the market calms down.
Market timing is a low-percentage winner. You cannot pick the market bottom.
Stop looking at your portfolio and second-guessing yourself.
This, too, shall pass.
If you feel like you absolutely must do something, consider these steps:
Review the holdings in your entire portfolio.
Ensure you can meet your current liquidity needs and implications of future cash flows.
Perform an ongoing assessment of investment weightings and risk exposure.
If you are inclined to increase your financial knowledge, create a stock wish list based on what you know best, and conduct your own fundamental research on the potential holdings. Former Magellan portfolio manager Peter Lynch explains his investment philosophy: “The best way to invest is to use your specialized knowledge to home in on stocks you can analyze, study them, and then decide if they are worth owning.”
Once market volatility subsides, be prepared to make rational, goals-based decisions about your portfolio’s future diversification of risk.
Think of this time as a learning moment and be proactive in shaping your portfolio’s future asset allocation and investment lineup. Having a long-term financial plan in place will give you reassurance, no matter how irrational the markets behave.
Kristin Hovencamp is an investment executive and director of business development with HAZLETT WEALTH MANAGEMENT, LLC, which is independent of Raymond James and is not a registered broker/dealer. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. All investing involves risk, including the possible loss of principal amount invested. No investing strategy, including rebalancing or dollar-cost averaging, can guarantee your objectives will be met. 675 Sun Valley Road, Ketchum, Idaho, (208) 726-0605. HazlettWealthManagement.com