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So How Do You Invest in an Uncertain World?

The financial services industry wants you to believe in the concept of absolute truth. They want you to think that you will be just fine if you buy and hold investments for the long-term. Unfortunately, that is not a slam dunk solution to investing. It does not always work out okay if you follow that formula. Consider re-thinking your beliefs about money by considering these five ideas.

I think that the answer lies in following a new set of principles. I will start with the most important one first.


  • Stay invested in stocks when it makes sense to do so.


That is a little different than staying invested all of the time. It is time to adopt the belief that it is okay not always to be invested in the stock market. You take the risk by investing in stocks when it makes sense to do so and not for the sake of always being invested.

  • Know the level of risk you are taking and be comfortable with it.


What percentage of your investments do you have invested in stocks versus how much in bonds/money markets/fixed investments? If you have 60% invested in stocks (any type of stock or stock funds), then you are taking 60% of the risk of the stock market. If you have invested 80% in stocks, then you are taking 80% of the risk of the stock market. The other percentage of your investments not invested in stocks would be assumed to be invested in high-quality bond funds, money markets, or fixed investments.


If you feel you are taking too much risk, reduce the amount you have in stocks.

Is this a slam dunk solution that always works? Do bonds always go up when stocks go down? No! Remember that there are no perfect solutions. It is just one strategy that you could use.


  • Know at all times where your investments are concerning your investment timeline


With an investment timeline, you know where you are supposed to be at the end of each year. For example, by the end of the year, let’s say that you need to have $400,000 to be on track. Today you are sitting at $395,000. That keeps everything in perspective. This tells you whether you are ahead or behind your goals. Remember, it is a year by year process. You need to know if you are falling behind. It gives everything perspective.


  • Pay attention!


I am not suggesting that you micro-manage your investments on a day-to-day basis, start the habit of evaluating every quarter. Understand how much you have gained or lost during every period. Learning how to interpret numbers is a process of learning. The key is to start the process.


NOTE: Investments outside of a retirement plan and old, abandoned 401(k) plans can be professionally managed. There are ways to invest in uncertain markets and still achieve your goals. If you want more information, email bob@prudentmoney.com