Can Your Portfolio Withstand Serious Volatility?

Sept. 14, 2017 -- Other than a few bumps in the road, it's been up and away with the stock market since the capitulation day in March, 2009.

You'd think a super hero has had something to do with it.

Sometimes the headlines create fear, especially in the wake of the devastating floods, political turmoil, and threats from scary countries.

But, the bullets have been bouncing off the markets of steel so far, but how long can it last?

History shows that it's just a matter of time ... when, not if, a "correction" will occur.

As often happens during economic and market expansions, people often fall asleep at the wheel.

And, having too many eggs in the stock market basket may have you headed for more stress than you or your wallet can handle.

(BTW: "correction" is just the industry's way of softening the term "plunge.")

Can YOU Tolerate a 20% Drop?

It’s hard to measure your risk tolerance until you’ve actually lived through a drop like in 1987, 2001 or 2008.

Did you get out at any cost, ride it out, or buy more at the lower prices?

Did you know that 20% drops happen on average every three years?

Experience is critical, especially at times like 2009.

Hypothetical scenarios on questionnaires cannot reflect how you will actually feel when the next drop goes live ... and it will.

A good way to learn is when you don’t have too much at stake yet, not when you're planning to retire soon or you're already taking withdrawals from your portfolio.

The Chicken Or The Egg?

All economic signs bode well for the market run to continue.

However, it isn't always the economy that leads to a recession or market plunge.

Pervading fear is typically the culprit.

​What will be the factor that leads the masses to the next cliff, either real or just perceived?

Are YOU ready?

Well, my crystal ball is on backorder still.

Preparation is key, so bling it on!

You Need A Plan

Consider the following ideas to prepare yourself for the next financial storm:

Cash is king (or queen)! If you don't have the income or cash reserves to weather the storm, building your cash reserves is where you should focus. If you're going to need some or all of your investments in the next 3 to 5 years, you had better take a close look at your current allocations, and fast!

Put your money where your time is: Your money shouldn't just look pretty in a pie chart. You need to look at the timeline to when those funds will be accessed and position them accordingly. You won't need to spend all of your money (hopefully) when you retire. Investments you won't need for 7 years or longer may have time to recover before you need to get at them.

Be true to yourself: We'd all like to think we're made of steel when it comes to our decision making, but it's the challenging times where we truly learn of our emotional capacity. If you were a nervous norvous in 2008 and 2009 (who wasn't?), then you should make sure your current holdings aren't going to make you want to get out at the wrong time.

You're not alone: PlanPrep can evaluate your portfolio to help you see how much risk you are taking and whether you should make some adjustments, either minor or major. We're here to help you develop a sound strategy that meets your short and long term goals. We also have investment strategies where you can position your money based on your experience level and timeline. Let us know if you'd like our help.

Now, I'm going to go check when my crystal ball might ship out.

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