Last year we saw the return of volatility to the stock market. This was a hard pill to swallow after a very smooth ride in 2017.
In 2018, the stock market had two notable downturns. At one point, the SP500 was down 19.8%.
But here we are, mid-way through February and the SP500 was back up to 2,753 (as of the close of business on 2/13/19). Remember, the SP500 hit its peak in September when it closed at 2,930.
We’ve gone through a lot of ups and down to end up in roughly the same spot. So what do we do from here?
We believe that with portfolio management, it is better to prepare than it is to repair.
By “prepare” I do not mean market timing as we know this is next to impossible to do with any level of consistency.
Rather, we believe it is important to design a well thought out and diversified portfolio so if the stock market goes down, there is a reasonable chance that something in your portfolio is either stable in value, going up, or is not down as much as stocks.
The stock market roller coaster can surely wear on you. But if you can remain invested for the long term, over time you will reap the rewards of the stock market. If you cannot stomach the ups and downs or maybe you need to access your capital sooner rather than later, we want to build out a safer place in your portfolio to absorb some of the shock that we’ll get from the stock market.
At the end of the day, every investor is different and has different goals and objectives. Everyone has a different appetite for risk. It is important though to look at your portfolio not as something that should be going up every single day, but rather as a diversified portfolio that has exposure to different assets classes that react differently to what’s going on in the world.
Bottom line, if your financial planning has been done correctly, your portfolio should be designed to get you through any tough time that could lay ahead.