A Publication of WTVP

Like most investors in the stock market, the investments you own represent years of hard work and savings, not to mention your hopes and dreams for the future. If the latest bumpy ride on Wall Street has you ready to put the brakes on investing, you might grasp at any word from the investment world.

However, most advice just doesn’t seem to be adequate for the current investment environment. We have all heard phrases like:

While there may be some truth to all of these responses, they probably don’t help you sleep at night. Furthermore these responses don’t take your specific circumstances and portfolio holdings into account. So what should you do? I suggest these three steps:

1. Evaluate your asset allocation.
Take the “Can I sleep at night?” test. Ask yourself: “Can I handle the amount of risk/volatility in my portfolio?”

Does the asset allocation need to be adjusted to meet your goals, based upon the current market value and remaining time horizon? Is your current asset allocation the right mix of asset classes to achieve your retirement goals?

2. Rebalance your portfolio.
Anytime the market moves dramatically up or down, you should consider rebalancing the portfolio. The various components of your asset allocation do not typically move in lockstep. In a down market, the equity component is likely underweighted compared to your fixed income and cash allocation. In a booming market, the opposite is likely true.

3. Look for opportunities.
Although you might not want to stray too far from your predetermined asset allocation, you can implement a defensive strategy by adjusting the types of investments in your portfolio. You might consider investing more or less in certain asset classes, such as large cap vs. small cap stocks, domestic vs. international, and growth vs. value, as well as certain sectors of the economy, including technology, healthcare, financial services and energy.

If you think of your portfolio as a money-making machine, when the market drops 15 percent, you may need to do some repair and maintenance work on the machine. Some people enjoy tinkering on the machine themselves. Others prefer to hire a professional. We suggest a four-step investment process to help you reach your investment goals:

Regardless of your approach, you may need to perform periodical repairs and maintenance to keep your portfolio operating efficiently. So don’t procrastinate. Schedule a time with your investment advisor to review your portfolio. iBi