High inflation, geopolitical tensions, and pandemic uncertainties. Couple these challenges with steep losses in both stocks and bonds, on top of slowing economies. Whether you serve as an investment committee member or simply effort to make the best of your own portfolio, we know this can feel unsettling and we are here for you.
With this year generating anything but warm-and-fuzzy feelings for investors, here is our suggested three-pronged approach to give your portfolio a fighting chance of prevailing.
Adopt a near clinical approach (if you have not already)
With stocks and bonds suffering significant losses and bad news coming forth daily, it is more important than ever to recall – or establish – goals for your portfolio. I have written many times about Fiducient Advisors’ use of our Three Levers exercise that helps clients construct portfolios. Rather than being struck smitten with trendy investments, this approach focuses on your desired goals, outside of the portfolio (e.g., a university may seek to provide more scholarships), and then assesses the Three Levers of financial inflows, outflows and required return as the basis for portfolio design.
If your investment strategy was built in clinical fashion with a link to broader goals, “sticking with the plan” becomes a little easier in these turbulent times. The objective is to avoid unnecessary risk, and for whatever risks you do assume, make sure they are necessary and in support of broader goals.
But what if, to this point, you have not invested in disciplined fashion and perhaps have assumed more, or less, risk than is appropriate based on your goals? There is no time like the present to finetune your objectives and make certain your portfolio is constructed in a manner that provides strong probability of success.
Whether you are an individual investor, a retirement Plan Sponsor or a nonprofit with an endowment or foundation, adopting this disciplined approach shifts the focus from the “here and now”, which will pass, and appropriately emphasizes strategy over fear.
Tap into Fiducient resources
Knowledge can truly provide an edge for investors in tumultuous times. I do not suggest that you must possess a professional-level, highly technical understanding. But having an appreciation for the frequency of bear markets and recessions, and knowing that there are cycles to much of this, can help investors avoid pressing the panic button at the wrong time.
You will find an abundance of useful resources in the Insights section of Fiducient Advisors’ website. Below, I provide links to several that are especially timely and useful at this stage of the market.
