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Whatever you happen to believe about the timing of the recovery, is it fair to say the majority of you want you to make sure you participate when it happens?
Would you also agree that participating in the recovery in a significant way will require equities? If you think that, then how much of your portfolio is in equities right now? Personally, I believe equities are a key part of an investment plan designed to achieve long-term goals. Obviously, after the happenings in 2008, the amount of equities a client should have has changed a bit, but it still should represent a portion of most investor portfolios. If anything If you’ve lost a significant amount in the market and you pulled out, when you do you get back in?
Equities matter
To achieve long-term goals and participate in a market recovery, your portfolio will need some portion devoted to equities. For those that are extremely terrified of the stock market, I will encourage them to start at least 15% in equities. If we have decided that our final goal is to have 50% in equities, then we will plan to dollar cost average over the course of the next 12-18 months. While this does not prevent losses, it does give the client some reassurance that we are not diving in head first.
Such a plan involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through periods of low price levels. Such plan does not assure a profit and does not protect against loss in declining markets.
Waiting Till Certainty is Waiting Too Long
By the time the recovery is a certainty, there will be a lot of missed opportunity in the rear view mirror. Those invested before the recovery participate from the start. If you weren’t buying stock when the Dow hit 6,400, you missed an excellent opportunity. If you aren’t buying now, will you be regretting it later?
Globalization Is Already Here
We live in a global economy, and the recovery may start outside the U.S. or in multiple places around the world. Investing globally in equities allows participation without trying to guess where and when the recovery begins.
IMPORTANT DISCLOSURES
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
- Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity. Stock investing involves risk including loss of principal Past performance is not a guarantee of future results.
Security Offered Through LPL Financial, Member FINRA/SIPC
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