The credit markets have frozen; stocks are down and the bear continues to maul us.
How are we to react? If the market would be so kind as to signal when it intends to change direction, then we’d know exactly what to do. But markets don’t provide such signals. In fact, when they do change they tend to be rather abrupt about it. Sitting on the sidelines can result in locking-in your losses.
Each and every client has been through a rigorous process of risk tolerance and asset allocation selection. This is the market that defines the process: If you can continue to hold your bow into the wind then we got it right. If you feel compelled to change course in the storm then we have failed to accurately gauge your tolerance for risk.
This market is the epitome of risk.
I’d like to proffer a few important considerations: Market rewards are payment for risk tolerance. It is impossible to decouple long-term market returns from short-term market volatility. We will always be faced with the choice: How much risk can we manage versus how much return do we need or want?
These comments are not being made lightly. I care intensely about my clients, my business and my portfolio. I am not having fun. But now is when the money is made: Now is the time to start bargain shopping; the time to buy right. That is why Warren Buffet and others are making huge strategic buys in this terrible environment.
My recommendation: Stick with your plan. As I have stuck to mine. If you can’t tolerate this environment then we need to throttle back your risk tolerance and exposure – permanently. The choice is not right or wrong, per se; it’s what’s right for you, my client.
Thank you for your continued confidence in Efficient Wealth Management.
