Since the Greece crisis began a number of investors have said the equity markets are too uncertain and there is too much risk. They believe they should avoid the equity markets and use safe investments like annuities until thing ‘calm’ down. The problem with this strategy is that there is always uncertainty and risk in the equity markets around the world.
There is always something going on to disrupt the markets around the world.
If you only invest in the equity markets when things look rosy you will be sadly disappointed over the long term. To deal with this fear of the future we need to develop a prudent portfolio and remain disciplined. Our prudent portfolio will be at level of risk we are comfortable with. You need to ask what is the worst case scenario for this particular portfolio over a five year span?
This could mean 60% in equities and 40% in high quality short term fixed income. It could mean more equities or more fixed income.
Regardless of how much equities are in our portfolio we must avoid the temptation to market time when things look ‘bad’. It also can mean we must avoid the temptation to market time when things look ‘good’. This means getting out of equities when times look ‘bad’ and buying more equities when times look ‘good’.
To be successful long term we must:
- Own equities and high quality short term fixed income.
- Globally diversify
- Rebalance
This may seem simple but during times of crisis and boom our emotions take over. We make emotional decisions with our investment dollars leading to poor results over the long term. This is where the investor coach/fiduciary adviser adds their value. Remaining disciplined during these times will lead to a successful long term results.
For investors that realize that they nor anyone else can predict the future. This disciplined approach will reduce your anxiety and increase end results.
We must all remember that the equity markets, well, all markets are random and unpredictable.
Working with an investor coach/fiduciary adviser is the first step toward finding a solution best suited for you.
The typical broker/agent will sell you whatever you want. Their main objective is to make the sale.
While the investor coach/fiduciary adviser will recommend what is best for YOU and your long term financial future.
