Wednesday, October 1, 2014

Wouldn't It Be Nice


October is here: autumn foliage is getting into full gear; it’s time for apple picking, pumpkin carving, drinking pumpkin beer; and the stock market is getting a bit more volatile. Statistically speaking, 25 percent of all 6 percent moves in the stock market (up and down) have occurred during the month of October. What does that sentence mean, and what does that mean for your portfolio? Simple answer: absolutely nothing!
We have all grown a bit complacent following the financial crisis of 2008–9. Since then, global markets have rebounded nicely, and one begins to wonder, “Why don’t I just own stocks? Why don’t I just own GoPro or Alibaba?”
I like to tell clients that it would be great if stocks went up every day, but they don’t. You have to accept that with up comes down. Over the past few months I have been reminded of the importance of asset allocation. Headlines announcing the current geopolitical risks—Hong Kong, ISIS, Ukraine—have heated up, making the daily swings in the stock market more pronounced.
Now is a good time to ask yourself some questions: Have my views about investing changed? Can I stomach another downturn? Have I become too conservative? Do I need to rethink my portfolio construction? It’s also a good time to review your savings goals: Do I have enough saved for retirement? Can I put more money away? Have I saved enough for my kids’ college tuition? What do I want my legacy to be? What kind of charitable contributions can I make?
I am not negative about the stock market; I am actually agnostic about it. No one knows from month to month what will happen. I do know that over time the market goes up more than it goes down. And I know that at some point I would like to retire, have a nicer bicycle, and play more squash. How about you?
It’s true, we can’t control the markets—but we can control our goals, and we can do a lot to create the outcomes we want and need.

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