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No, We're Not Done Yet

No, We're Not Done Yet

| August 21, 2020
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Back in April I wrote not to get too giddy about the then current upward swing in the markets. 

I still feel that's the case, even though the markets have generally continued their upwards path. 

Our economy has gotten hammered, there are many businesses who've lost a tremendous amount of revenue since the beginning of the year, some of those businesses will not be able to re-open, and some will but with a temporary loss of income that will affect them long term. Some people have and will retire instead of going back into the work force, and some will have a very hard time finding a new job.

Not all of this means only bad things. There will be new businesses opening up in place of businesses that have closed. There will be new jobs created through these events too.

But overall, while the markets are going quite nicely at the moment, the previous losses, and potential losses still to come, will eventually weigh heavily on the investment markets. How heavily, and for how long is yet to be determined. The good parts... new jobs, new businesses.... that'll come, but it'll take a while, and the effects won't be until after we assess the damage done first.

So I'm still thinking not to get too giddy, don't let your investment guard down, and keep doing the things you always should be doing as an investor...

Make sure you assess your risk correctly. Not just the risk each individual account should have based on what that account will be used for, but more importantly, assess your very own risk comfort level to make sure you know what you're comfortable with. 

If risk were on a scale of 1 being the minimal amount, and 10 being the maximum amount, and you only feel comfortable, at most, with a level of 7 risk (the highest amount of volatility that will not keep you up at night), than your own personal scale should range from 1 – 7, with 7 being the maximum amount of risk embedded in your most aggressive account. The individual accounts that you have that should be the most aggressive, for you, should only go to a "level 7 risk". That way, no matter what happens in the markets, you should feel comfortable with what even your most volatile account is doing.

Diversify. Spread your risk over varying, less correlated asset classes (Stocks/Bonds, Small/Large, Domestic/International, & varying industries). You may pass a street vendor who has umbrellas and sunglasses on his table and wonder why he purposely carries such opposite products. Those are the vendors that do business every day, no matter what the weather.

Asset allocation is important. Make sure your own allocation reflects your risk comfort level.

Consider re-balancing your accounts if they get too out of whack. If one asset grows too fast, your asset allocation may no longer be what you set it out to be, and therefore, may no longer reflect what is appropriate for your risk comfort level.

Remember, investing is a long term endeavor. What happens now may have little effect 60 or 240 months from now (5-20 years). Unless it's a short term investment, thinking short term will add to the stresses and uncertainty you feel and potentially cause you to make choices that are un-wise in regards to investing.

If you have an account that is short term, it should be reflected by an appropriate risk level. 

Again, I don't think this upward trend will continue, and I don't think the negative volatility we'll feel after that will go on forever either. But if you have your portfolio correctly allocated and diversified to reflect your own risk comfort levels that are appropriate for you as an individual, in a holistic way, your concern won't need to be on the markets.

If you're a client of Financial Concepts Unlimited, LLC, and have a Managed Account with us, we already have that taken care of for you. However, if you have any concerns, or feel in any way you'd like to discuss this further, than we always want to hear from you.

Whether you're a client of FCU or not, if you have any questions or concerns, always feel free to call. We'll be glad to discuss any aspect of Financial Planning and Portfolio Management with you.

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