Happy October! If it weren’t for the pumpkin spice lattes I wouldn’t believe it myself. As we find ourselves treading in waters of historical market highs and approaching the end of the year, now is the perfect time to take inventory of your investment strategies.
Since I’m in my 30s, people don’t always realize that I’ve actually had first-hand experience with our last two market crashes. First, as a young investor during the dot.com bubble. Second, as an advisor during the 2008 financial crisis. I remember September 15th of 2008 when Bank of America bought out Merrill Lynch and Lehman Brothers filed for bankruptcy. It felt like the world around me had changed in a day. I learned a lot from our last recession including a few things that may help when taking inventory of your portfolio.
#1. The first thing that I learned during our last recession is the importance of diversification. Yes, during that time it felt like everything was down, but the reality is that some asset classes were up and some lost less than others. In the years since the bottom, we’ve also seen different asset classes rebound differently. So whether you’ve got a bunch of money in cash or you’ve gone all in on the S&P 500, I recommend taking a look at your asset allocation to make sure that you know what’s going on.
#2. I also learned that while panic didn’t help being prepared did. Historically our economy follows similar business cycles over time so it’s usually not a question of if we’ll have a recession, but when. And yes, I know that sounds scary. During our last recession, I had a number of clients who were experiencing a recession for the first time. One week in Spring of 2009 I remember receiving panicked emails from two different clients in their 30s looking to sell off their 401(k)s at 30% losses. I reminded them of the financial plan we had and explained that selling at this large of a loss due to panic was not part of that plan. They listened and I’m happy to say that they made back their losses and stayed the course.
#3. One last lesson that I’ll share is that no one has a crystal ball. Things happened during the last recession that surprised all of us. Plus we don’t know when we’ve reached the bottom until after it’s already happened. With that being said it’s incredibly important to make sure that you have a plan for your money. Whether you’re pulling money out, putting money in, or just maintaining it’s important to make sure that you have a plan.
Have you taken inventory of your investments recently? Do you know what you’re invested in? And are these investments in line with your financial plan? Not sure? CLICK HERE to let us know if we can help.