Amidst the Worries....

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If you are like so many U.S. investors, you can’t help but be a little worried this holiday season. Domestic equity markets have been more turbulent recently than at any time since the 2008 financial crisis. You are probably also busy trying to enjoy the season, so we’ll keep this brief.

For most affluent investors, it is best to keep on rebalancing—or start rebalancing—even when markets seem discouraging.

Substantial declines in markets are a normal part of investing. The U.S. markets’ recent declines are the worst in a decade. However, in the long run declines of 20% or more have occurred about every 3-3/4 years in the U.S. (since 1900). Therefore, what we have been going through, though unpleasant, can also be thought of as approximately normal.

Rebalancing has long been known to be helpful for investors, with the benefits of “selling high and buying low.” Rebalancing on a schedule, instead of sporadically, can take some of the stress out, so you may want to consider rebalancing every three months on a schedule instead of only occasionally. Research suggests that routine rebalancing, including during declines, should continue to be fruitful. We recommend quarterly rebalancing for most portfolios of substantial size, assuming that the overall asset allocation remains sensible for you.

Indeed, buying more equities at times like now—during or after a period of decline—is likely to be something that a long-term investor will look back upon fondly, is our opinion.

If you start to rebalance and find yourself uncomfortable with all of the equity buying that seems recommended by your high-level strategy, it is always an option to buy just a portion and wait a short while on the balance. Also, do remember to stay highly diversified, including investing globally rather than just in the U.S.

One caveat: If you have equities that are really for short-term goals, buying more is probably the wrong idea; you may need to think about doing just the opposite and possibly sell, even at seemingly depressed prices.

We hope you enjoy the holiday season, markets notwithstanding.

Of course we invite you to contact us to open a conversation. Or click here to watch our Managing Partner, Tom Gerson, discuss our history, approach, and values.

Disclosure: This article may not be accurate for your specific situation. Results are not guaranteed. Investing at any time can lead to losses. Advice is only rendered under contract. Please see our website footer for further disclosure information.