It’s human nature to take whatever scenario we are experiencing right now and extrapolate it into the future. But life, and the global economy, are cyclical. We go through seasons of growth, decline and recovery. Usually investor sentiment is at it’s best or worst when we’re about to enter a new phase of the cycle. When the stock market or real estate or tulip bulbs are booming, investors stumble all over each other to buy them. Likewise, when these markets are crashing, investors scramble to dump them.
I don’t know if we are going into another recession or if we are just going to muddle through. But there is opportunity to make money if one keeps a long-term perspective. In the age of Facebook, Twitter and Linked-In, we are constantly updated and inundated with the status of the people we follow. This has damaged our ability to keep ongoing events in perspective. Investing (and life) is a marathon not a sprint. Some days are frustrating (or scary) but it’s part of the journey. It doesn’t seem to work out the way we expect it to but it does work out.
I’m not suggesting that we take a Pollyanna attitude about our portfolios. Quite the opposite, I’m suggesting we position ourselves to weather whatever might happen. We have been rebalancing clients to weather these uncertainties. Now is a very good time to review the risk in your portfolio.