BY KRISTIN HOVENCAMP
One of the most common questions posed to me is, “Given today’s markets, where should I invest my cash?” That’s a loaded question. Each person’s circumstance is unique, and there’s no one-size-fits-all response. Before you make any investment decisions, formulate answers to these questions.
What keeps you up at night, specific to your finances?
Most everyone feels money-related anxiety. According to the National Endowment for Financial Education, “Money woes are the number one reason more than 50 percent of adults in the United States can’t sleep at night.”
How did you react to previous market crashes?
Can you remember how you felt October 19, 1987, commonly referred to as Black Monday? That infamous date set in motion investment losses worldwide estimated at $1.7 trillion. How about the 2000 dot-com bubble burst, or the Great Financial Crisis of 2008? What was your emotional reaction when you dared to look at your 401(k) or personal portfolios?
I may not remember precisely how I positioned my assets before each market crash. Still, I will not forget the visceral reaction I experienced as I watched my nest egg shrink before my eyes. I have subsequently learned that I do not have ice in my veins.
How much would you be willing to lose?
Markets hate uncertainty, as do most investors. How much time do you have to recover from significant losses? Research has found that financial comebacks often take years. Many investors do not recover from their setbacks. If your investment horizon isn’t long-term, can you ride out a bear market?
Herein lies the rub.
Black Swan events occur much more frequently than every 100 years. Suppose you’re already retired or nearing that path; set aside enough cash for your liquidity needs. Invest a portion of your portfolio in creating the income stream you seek. Commit enough of your assets to growth investments to keep pace with inflation. Allow an extra cushion for joyful expenditures. Detach yourself from the market mania and expose your portfolio to no more volatility than you need to accomplish those objectives.
Kristin Hovencamp is an investment consultant and director of Business Development. HAZLETT WEALTH MANAGEMENT, LLC, 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 the principal amount invested. 675 Sun Valley Road, Ketchum, Idaho, (208) 726-0605. HazlettWealthManagement.com