According to Matson, anyone who’s panicky right now needs to make a change. “If they are feeling pain and stress and anxiety, that’s their cue they have not created a well diversified long-term portfolio,” he says. Long term for him means a full two decades, not the 3.5 year average for mutual fundinvestors. “Create a portfolio that you can live with for 20 years,” he says. “Then you can stop worrying and fretting and getting terrified when things drop – or getting overconfident and exuberant when things go up.”And here’s what he says you should do this weekend:
1) Go home.
2) Don’t buy or sell any stocks, bonds or other investments.
3) Get a copy of your portfolio.
4) Find someone who will do an independent analysis of it. Don’t trust a commission-based broker to do this. You need someone who’s objective, not selling anything.
5) Arrange to have that person analyze your portfolio to find out how much risk you have in it. “A lot of people have only large U.S. stocks and think that’s diversified,” Matson says.
6) Plan to create a portfolio where you know the amount of risk. (Do a full financial plan while you’re at it – life insurance, disability insurance, the works.)
7) Enjoy the weekend.
Great advice for all occasions.
Please comment or call to discuss.
- Wealth Matters: Managing an Investment Portfolio for Risks, Not Only Returns (nytimes.com)
- When capital preservation is the main objective (theglobeandmail.com)
- Easy Ways to Invest (billshrink.com)