How Emotional Decisions Can Ruin Your Investment Strategy Insights From the Cornerstone Blog
When an investor reacts emotionally to a market decline, they often pull money out of the market, derailing their investment strategy and leaving them far less exposed to equity markets. Often, these moves are made very near the bottom of the market, and the investor leaves behind a substantial portion of return. This year, the S&P 500 raised the hopes of many by climbing more than 7.5 percent by January 26 and then dashed them by falling more than 10 percent in the next 13 days. When the S&P 500 approached the 10 percent threshold, some investors became nervous and reduced their risk by selling stocks and going to cash or bonds. This is the point where they started leaving money behind. Rather than continuing to drop, the S&P 500 has climbed and may
continue to trend upward. Unfortunately, once an investor derails their investment strategy and reduces their allocations to stocks, they don’t have a method for determining when to get back in. Rather than pulling money out of a portfolio of diversified investments, a better approach might be to use asset allocation strategies designed to manage or reduce risk during significant market declines. These approaches reassure investors that their portfolios are being adjusted to reduce risk while benefiting from a strategy that ensures minimal return is left behind. We see these strategies as potentially more beneficial to clients trying to balance an asset allocation in retirement. When a person can’t extend their career or increase retirement contributions, the ability to
recover from downturns becomes a bigger challenge. In a low-income environment, using systematic approaches to risk management can manage the downside without relying on the still-paltry income provided by bonds. Now seems like a good time to reassess risk. If you were able to hold on during the last decline but don’t want to experience something like that again, the recent rally has put you close to even. You’re unlikely to regret making a change right now. Most importantly, your portfolio will be better prepared for the next sharp downturn. For more from the Cornerstone Wealth Management Group blog, visit cornerstonewealthgroup.com/insights/blog .
Sudoku
Brussels Sprout and Kale Salad
INGREDIENTS •
•
4 tablespoons fresh lemon juice 1/2 cup extra-virgin olive oil Kosher salt and fresh ground pepper, to taste
1 pound Brussels sprouts 1 bunch kale, destemmed and finely chopped 2 tablespoons whole grain mustard
•
•
•
•
DIRECTIONS 1. Trim stalks off of Brussels sprouts. 2. Using a mandoline, food processor, or very sharp knife, shred Brussels sprouts very finely. 3. In a large bowl, whisk together mustard, olive oil, and lemon juice. Add kale and Brussels sprouts and toss to coat with dressing. 4. Season with salt and pepper to taste. 5. Serve.
Answer on page 4
www.CornerstoneWealthGroup.com | 3
Inspired by Saveur magazine
Made with FlippingBook - Online catalogs