Saturday, November 15, 2008

Shelter From the Storm

Taking shelter from a storm can be advisable. However, the type of shelter you take can make a big difference. Running from a thunderstorm to stand under a lone tree isn't always a good idea. Not only is the tree prone to lightning strikes, but you become somewhat stranded. When do you make the next move to a better location?

The stock market is posing a similar dilemma these these days. Market declines & daily volatility is causing individuals to question their asset allocation and investment strategy. The Dow Jones Industrial average has decreased from 12,000 to 8,500 in a few short months. This translates to losses in real dollars on quarterly financial statements and heightens anxiety levels.

Before going into battle, military leaders will make 'what if' decisions before the potential event ever occurs. This allows for clear & concise thinking ahead of time. Making decisions when your pinned down by enemy fire can be troublesome.

Your investment plans should be the same. Good financial planning starts on day one. Knowing your risk tolerance, time frames and investment objectives should be clearly stated. This allows for good asset allocation and implementation of an all weather portfolio. This doesn't mean your portfolio won't lose value during challenging periods, but the key ingredients to future success are in place.

Changes to your portfolio should be made during the review process. Should life altering events take place (i.e. loss of a spouse, divorce, marriage, etc.), changes are often warranted. So, while it may be raining at the moment, have faith that clearer skies will eventually prevail.

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