17 Oct 2014 Good Perspective

Some of the best advice during times of stock market uncertainty can be to turn off CNBC and ignore the financial section of your newspaper for a while.  That is, of course, if you’ve planned ahead and set up your portfolio to withstand the markets’s ups and downs.

Still, even with the TV turned off and the newspaper in the recycling bin, it’s nearly impossible not to hear bits and pieces of news about the volatility in the stock market.  Kind of like when you’ve recorded last night’s game to watch tonight and you’re walking around town covering your ears and making loud noises anytime someone even comes close to mentioning the score.

When we hear that the market is experiencing a period of volatility our emotions can cause us to feel as if our own investment experience is synonymous with that of the stock market in general. Just remember that in order to experience those same results, your portfolio would need to consist solely of stocks.  I can count on one hand the number of people I know that only own stocks.  If you’ve done the work ahead of time to remove the unnecessary risk from your portfolio your experience is probably more similar to that of a balanced portfolio (53% U.S. stock, 7% international stock, 37% U.S. 7 -10 yr Treasuries, 3% cash) which shouldn’t be nearly as volatile as a portfolio that only owns stocks. Why doesn’t the financial media report the day’s trading results based on a balanced portfolio?  The information would be more appropriate for the average investor, and we wouldn’t have to cover our ears when someone mentions the stock market at tonight’s neighborhood cookout.

As always, if you don’t have a plan or need to revisit yours, please give us a call.