One of the things that gets lost in the “buy/hold/sell” debate is how investors will sleep at night. I bring this up now given the recent volatility in the market place.
Looking at the short-term, could this be a quick move down before we move higher by the end of the year? Of course it could be. Corporate earnings are still very good and the macro data, while troubling, still seems to indicate expansion.
Could it also prove to be the start of a larger move down? Of course it could be. There is no shortage of headwinds and secular bear markets can be quite choppy.
When coupled with my last post, what I am getting at is that regardless of where we go in the near-term I am pretty certain increased volatility and uncertainty isn’t going away for awhile.
Depending on your risk tolerance, outlook, and/or time horizon it could be beneficial to take some risk off the table, increase cash, add hedges, and/or adjust your allocation. On the flip side, you could also see this as a buying opportunity and add risk accordingly.
Regardless of your decision, one of the most important factors is that you understand the risks you are taking and are comfortable with your overall portfolio allocation. If you are up at night worrying about your money, it’s time to get a better handle on risk and possibly re-evaluate your allocation.
