You don’t need me to tell you last 12 months in the stock market have been THE most volatile ever, for those of us still alive! (There was a 90% Crash in the 30s)
September – October 2008 represented 50% portfolio losses for many investors. As a result, many have decided to take a more conservative stance in regards to their risk tolerance. As a result, you guessed it, they have probably missed this latest rebound, which was the largest 1 month gain in like 20 years.
Media pundits and Wall Street will say, “See if you jumped out of the market, you missed the recovery” blah…blah…blah. And while there is a truth to this, no doubt, I have noticed that many investors are simply sick and tired of the roller coaster of Wall Street. Are we supposed to just tolerate losing almost 50% of our assets and then stand pat? It’s not that easy.
If you are looking at retirement in the next 10 years or less, these markets will keep you up fretting at night. Remember, many investors have simply broken even the last 10 years. This isn’t a post against investing. That isn’t the point.
The point is that the modern theories of investing (Buy and Hold, Diversify, etc) All of these espoused by Modern Portfolio Theory, need to be looked at, reconsidered and critically examined. I’ve discovered what I believe is a much less stressful way to invest, part of which involves investing in hard assets.
To simply tell anyone, “You should be allocated 60/40, equity fixed income, is nothing short of a disservice to the average investor. What if part of the 40% is long term bonds (which just took a beating the last 12 months? This is analogous to a doctor telling a patient, “Eat food and drink water.”
Asset gathering and PARKING those assets is what makes fund managers fat and happy. The questions you need to start asking are: What investments are you in? Are you taking on too much risk? Do I even know the average maturity of my fixed income investments? How healthy is the insurance company that just offered me a 10% bonus?
Case in point is we are currently operating on a flat yield curve, where there are very very little rates to offer a portfolio. Therefore, the risks of having your portfolio drop in value due to rates rising are not worth the marginal gain realized by stepping out on the yield curve.
Then you have to wonder, WHAT IF this is just a “sucker’s rally” a bear market rally? Are you properly hedged (again, not just diversified) so that your portfolio is not possibly standing on a cliff?
These are all things you need to talk about, think about, study, research. The money you have spent years to work for is at risk, always. You owe it to yourself to educate yourself on your investments. Get involved, ask questions, read, learn!
Today is not too soon! Don’t get lazy!
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