The Road Back – HumbleDollar

What to do? What to do? In his latest article Jonathan Clements has suggestions on how to think about investments in this volatile time.  Be sure and read the full article at the link below. 

1. Don’t doubt the recovery. The market’s rise may reflect the collective wisdom of millions of investors, but there have been naysayers every step of the way, and that’ll continue. The media loves a good debate, so bearish strategists and money managers will get a fair amount of airtime.And every so often, they will seem prescient. We’ll have bad days and weeks in the stock market when news about the economy or COVID-19 disappoints. Indeed, the speed of the economic recovery remains a huge unknown—and developments that suggest it might be slower than expected will dent share prices. But the setbacks will likely prove temporary. The issue isn’t whether the economy and hence the stock market will recover, but when.

2. Don’t sell too soon. After the stock market’s shellacking over the four-plus weeks through March 23, many investors are no doubt relieved to have recouped much of their losses—but also fearful that the rally could go into rapid reverse. Tempted to sell? Blame it on the old “get even, then get out” mentality.To be sure, a little selling could be justified. If your portfolio targets are 60% stocks and 40% bonds, and you rebalanced back to those percentages earlier this year when share prices were depressed, you likely now have significantly more than 60% in stocks—and you’ll want to rebalance at some point. I can’t tell you when’s the best time to do so. It’s a tradeoff: Postpone rebalancing and your portfolio will perform better if today’s rally continues, but you’ll also suffer more if share prices falter.Of more concern to me are those who, both scared and scarred by this year’s slump, decide to radically reduce their stock holdings now that they feel they’re back to even. We got a taste of stock market risk earlier this year: If folks sell now, they’ll have suffered through that risk—without ever getting their long-run reward.

MORE at the Source: The Road Back – HumbleDollar

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