Situation:

Life is full of surprises; stock & bond markets too are full of surprises.

My View:

Take some profits as prices rise and slowly buy quality as prices retreat.

Solution:

Don’t allow volatility to scare you off the simple game plan that works so well.

 “My momma always said life was like a box of chocolates. You never know what you’re gonna get.” — Well known script from 1994 movie Forrest Gump

The markets too resemble that box of chocolates. Both the stock and bond markets. Trading day after trading day. This is not the time to stress about them, so no apprehensions or distractions please. Think of them as moving targets.

Wise investors know that trying to forecast the markets is a mug’s game. Just when you think daylight is breaking and you’re making a little headway, a curveball suddenly jumps in your pathway. Often, it is one or more missed economic expectation, such as jobs, gross domestic product, housing starts and retail sales.

Some days investors revel in an abundance of optimism. Other days are filled with heaps of pessimism. So, can the markets advance from here? Yes. On the other hand, can the markets retreat from here? Yes, on that too. Accordingly, I continue to plan investment strategies for both market advances and pullbacks.

Making sense of the daily dose of endless market changes and interpretations is far from an exact science. The same “box of chocolates” analogy easily applies. For example, just about everyone was expecting the low returns to have moved up a tad by now. However, many bond yields are essentially range bound, akin to bouncing off two walls in close proximity.

A brief overview of the US personal saving rate indicates that it peaked at over 11% in late 2012. It has since plummeted to 3.8% in June 2017. Not to mention that more families are now swimming with heavy debts in the deep end. Yet, they are still expected to fuel the consumer driven economy.

Further, too many investment portfolios I peruse for the first time are saddled with a less than stellar asset mix to navigate the ongoing uncertainties. My observation is that action times for reviews, debates, tweaks and decisions are here. Complete scrutiny of the investing box of chocolates is often long overdue. Particularly, for investors whose stocks and mutual funds exceed 2/3 of total portfolio. More importantly, also for those now retired or nearly there.

My approach
I recommend investors remain calm and patient. Then implement these sensible moves:

  • Learn to realise some profits on investments that have done well.
  • Set aside your emotions and sell the losers that you keep clutching.
  • Reduce investment risks with dividend payers and short term bonds.
  • Ensure that maintaining investment quality is a part of all your selections.

Hopefully, you are not concerned about your investment box of chocolates. Familiarity with the contents of that box of chocolates improves your investing outcome. Don’t allow the constant barrage of fears, worries, jitters and investment volatility to scare you off the game plan that works so well.

It’s true. “You never know what you’re gonna get.” Stock and bond markets included.