Many of us who have the news on during work day are subject to the periodic emergency alert system television tests. When I heard one this week, I couldn’t help but think “wow, this market correction, so far, has ‘been only a test.’”
After we had the fastest 10% correction in 80 years and currently a wonderful 4 day winning streak across major indices, I think most people who have stayed put or better yet rebalanced are feeling better about their portfolios.
As we’re nearing neutral for the year across many major indices, I think this is a good time to examine our asset allocation, goals and risk tolerance.
- How were we feeling? Did we sell out of this market at any point?
- Are we willing to trade off a better feeling during volatility for potentially altering retirement income prospects or long-term goals?
- If we said in our risk tolerance assessment that we would put money to work during a correction, did we? Often answering yes makes an investor’s risk score more aggressive.
- Did we ‘re-position’ certain investments and harm our returns? For example, sell technology when it was doing poorly, buy utilities because they seemed to be doing well that day and then have a negative return on the utilities as technology stocks rebounded? I bring this up because there was a lot of interest rate sensitive sectors like Utilities and Telcom that have had volatile, up and down days.
Talk to your financial planner about how you’re feeling and how any risk tolerance change may affect your overall goals and objectives. These are all important thoughts to consider because next time we have a decline like this, it might not be a test.