Financial Armageddon?
Posted by Mike Lanway on Fri, Aug 05, 2011 @ 03:21 PM
OMG! Pull out your hair, hide under a table, and kick and scream! Financial Armageddon is here!!
This is the message that I have been getting as I watch the “news” programs and listen to the “experts.” Panic is in the air, and misery loves company. So the call goes out for you to join the crowd as the lemmings race over the cliff.
Or you can be assured that you have already done everything you can to get the best market returns that will be possible over your lifetime.
That’s if you have a globally diversified portfolio that’s rebalanced on a regular basis: bonds and stocks; large and small; growth and value; U.S. and international. In TSP, that’s the L Funds. In your 401k or SIMPLE IRA, you have to make sure your choices reflect that kind of diversification. That’s what an advisor is for.
If you’re globally diversified across these assets classes, then you can stay calm, watching carefully, but refusing to play the game of increasing costs by creating needless transactions and trying to time the market. But if you’re not, get that way quick, because in a down market, there’s really no place to hide. It may be a rough ride, and you need to get strapped in and hold on, because I recommend that you stay in the lifeboat.
For those of us who have a globally diversified portfolio, remember that, although our balances are likely to lose value, we haven’t lost money until we sell out. When share prices go down, balances go down. That’s just simple math. But if we hold on, the number of shares we own won’t go down; instead, they’ll grow as our accounts are rebalanced from our global positions and we’ll buy up what others are selling. Because we’ll own more shares, we will recover quicker, and we won’t need the market to get back to its previous highs for us to get our values back and then some. In the end, the passive investment strategy of accumulating shares wins the game.
Those of us that are globally diversified, we do not panic; we do not run. We wait, for we know that this too will pass, the market will recover, and we will prosper when it does because we stayed the course.
We give you the confidence required to have the success you want and the peace of mind you need.
Have a great weekend,
Mike