This market is all over the map.
How do you approach your investments? What is the best way to go? It really comes down to three different strategies.
1) Do nothing – buy and hold for the long-term
This is what Wall Street wants you to do. The market could be in a freefall about to lose 45% and their instruction would be “stay invested because we are investing for the long-term.”
There are times to be fully invested in stocks and there are times when it is very dangerous. Buying and holding is a substitute for thought. There are times when it makes sense to take less risk in your portfolio. The bottom line is to take the amount of risk that makes you the most comfortable.
There is an old saying. Investors make money in bull markets and bear markets take it away.
Don’t forget that 18 months of losses erased 12 years of gains for those who bought and held during the financial crisis.
2) Defensive Investing
This simply means you reduce the money in stocks and increase the money in bonds/fixed investments/money markets. With the exception of a few time periods, that has worked to reduce risk. There have been times when stocks and bonds have both lost money. This is why it is important to also keep a good percentage in money market accounts.
3) Offensive Investing
Can you really make money in a bear market? Yes, there are ways to make money in a bear market. However, this is not something that I would try to do on your own. It makes sense to work with an advisor or money manager who knows how to do this type of investing. It is not a slam dunk solution by any means. However, it does position you in the best way possible to preserve your principal and increase your profits.
Please know that this has nothing to do with equity index annuities. This is professionally managed money.
For whom would this work? It is appropriate for anyone who has at least $50,000 in an IRA or regular investment account.
If you are interested in learning more about the Prudent Money Management strategy, please give me a call at 972-386-0384 or e-mail me at bob@prudentmoney.com
