With Stocks Up, How’s Your Portfolio Risk?

By Johannes @ Adobe Stock

With stocks having a banner year, today may be a good time to look at your overall asset allocation. Do you have enough bond exposure? Are you generating income to help guide your retirement life? What if the market declines by a third? Will you be able to ride it out? Remember, stocks can stay down for a long time. Look what happened to the Dow Jones Industrial Average from the mid-60s to the 1980s. Not pleasant for equity investors at the time.

Your Survival Guy is a natural optimist. But I’ve seen my fair share of disasters, both manmade and natural. The manmade ones can be the worst. Because it’s today’s market, being up so much this year, that guides investor emotions. When stocks go up, the average investor feels they will continue to go up.

Then, like frogs in a pot, investors look at a year’s worth of declines and wonder if it will ever turn around. Too late. Then all they can think about is whether stocks will ever go back up. We’ve been through some brutal markets so far this century.

And like clockwork investors have short-term memories of how bad it really was. They don’t think about the fact that today they’re quite a bit older than they used to be and don’t know how their emotional response will be because they’ve never been this old without a paycheck.

Today, not after the fall, is as good a time as any to run back the clock. It’s a good time to take out a napkin and look at how you’d respond if stocks were down 30% this year instead of up. It happens. Put your age in bonds and think about how you’d weather a future storm.

Action Line: One of the hardest things for investors to do is to reduce stock holdings while markets are up. But this shouldn’t be about stock prices and where they are going. It has to do with you and making sure your investments reflect your risk tolerance. To find out, email me at: ejsmith@yoursurvivalguy.com

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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