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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