A year ago the answer to that question wasn’t encouraging. One of my clients told me: “I’m sleeping like a baby – I wake up every two hours and cry myself to sleep!”
We’re about to celebrate the one year anniversary of the March 9, 2009 market low. It was one of the darkest moments in the history of global financial markets. Thankfully, the situation has improved vastly since then.
We are no longer in the midst of Hurricane Fannie and Freddie but storm showers continue to pop up around the globe. That’s alright. There have always been unexpected financial events (like Greece) and there always will be. That’s the nature of risk and it is a key characteristic of the financial markets that many investors did not understand until it happened to them, and experiencing it is very different from an academic understanding.
No one can control performance. The only thing we can control is the risk we’re willing to take. We do that by designing our asset allocation and choosing the best possible components to populate it. Now is a good time to evaluate our portfolios. To see if our asset allocation will maximize the likelihood that we will achieve our long-term objectives and if we are comfortable with the risk of owning the components in our portfolio, or if it makes sense to make adjustments.
Write down your goals. Review your portfolio and ask yourself, “are these reasonable?” Being honest with yourself about the situation and managing our own expectations are what help us to sleep well at night.