Prepare to be surprised

At the risk of understating the obvious, these are uncertain times. Surprise and drama are the order of the day in our nation’s capital. The economy is showing signs of slowing down, perhaps slipping toward recession. And investors, naturally, are growing less hopeful and more anxious.

Growing talk of recession and market corrections might have you wondering what to do in preparation. But if you’re looking for advice on when to sell out your portfolio and move to cash, you won’t find it here. Fear makes headlines, but it’s no investment strategy.

What I would advise is that you take a good look at your portfolio right now and consider making some adjustments if warranted. Is your allocation to stocks much higher than where you set it originally? Have you doubled down on your favorite holdings over the last couple of years at the expense of proper diversification? Did you make the mistake of buying things just because their prices were rising?

If you answered yes to any of these questions, it’s probably time to hit the reset button and rebalance your portfolio back to sanity. Take some profits and add the cash to other holdings that haven’t yet had their day in the sun. (That’s called buying low and selling high, by the way – always a good idea in my book.)

Once you’ve tidied things up a bit, close your laptop, turn off CNBC/Fox News/MSNBC for a while, and mute your smartphone. Find a quiet place and a comfortable chair. It’s time to do a little thinking for yourself now.

I want you to recall, as best you can, the feelings you experienced during a past financial crisis. Maybe it was the brief but scary bear market sparked by the pandemic of 2020. Perhaps it was the horrifying Global Financial Crisis of 2007-08. If you’re old enough, you might even remember how you felt when the tech/telecom bubble exploded almost exactly a quarter of a century ago.

In all three of those epic market collapses, investors panicked and sold stocks, often at the worst possible time (selling was heaviest in the final months of each bear market when prices were bottoming, as is typically the case). Just as they had bought certain stocks just because their prices had been going up, they sold them simply because they were going down. Investors panicked because they were afraid and uncertain. But most of all, they panicked because they were surprised.

This is not an attempt to forecast the short-term future of the financial markets, despite some eerie similarities to prior euphoric episodes. Whether today’s fascination with artificial intelligence stocks and cryptocurrency is similar to past obsessions with dotcoms and subprime mortgages remains to be seen. Your job as steward of your family’s finances is not to predict the future, but to prepare and plan for it.

Prepare now by restoring your portfolio to its original settings. Prepare by deciding how you will calmly react when investing isn’t as easy as it’s been for the last couple of years. Prepare to be surprised – and then refuse to be.

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.