Part of a successful investment methodology is generating positive investment results in multiple market conditions. In today’s investment world, investors need to look beyond the traditional bull market and bear market. Investors also need to consider what we at 4Thought Financial Group define as the “Wolf” and the “Eagle” portions of market cycles.
Investors might be able to generate returns easily when markets are moving upwards. But what about if markets are soaring to new highs and there are few, if any, bargain-priced stocks or bonds? Or if there is heightened volatility and price trends go sideways? Regardless of the market environment, an investor must realize returns within their portfolio, because their retirement goals do not change when the market does.
There are important considerations that let investors realize returns and limit risk within their portfolio. Let’s take a look at a couple.
“Time in the Market, Not Timing”
Volatility and risk within financial markets is a fact of life. Although there is no way to eliminate this completely without sacrificing your long term standard of living, there are ways to mitigate the effects of adverse moves in the market. One way is through asset allocation.
Asset allocation is defined by the percentage split between different types of assets held in a portfolio, such as stocks, bonds, cash, commodities, real estate, and all of their sub-types. An optimal asset allocation is one of the keys to successful investing, but it only works if an investor stays in the market.
you miss 100% of the shots you don’t take.
Time in the markets means staying invested in every market condition. Selling in a panic or re-allocating a portfolio without a pre-determined strategy for doing so is not the way to go, regardless of your portfolio size or your experience as an investor. After all, hockey great Wayne Gretzky said it best when he said “you miss 100% of the shots you don’t take.”
Develop & Implement Your Own Course of Action
At 4Thought Financial Group, attempting to produce investment results across multiple (even adverse) market conditions is the cornerstone of our investment methodology. Our belief is that investors can generate returns with a flexible multi-method approach that best reflects their unique goals and risk tolerance, along with their personal circumstances. We also believe that conventional wisdom from the past is simply not enough in today’s complex investment environment.
Working in cooperation with your financial professional will also yield more appropriate recommendations that can enhance your results as you wade through the various phases of the market cycle.
Leave a Comment