Protect Your Portfolio From a Market Crash
https://money.usnews.com/investing/investing-101/slideshows/7-ways-to-protect-your-portfolio-from-a-stock-market-crash?src=usn_invested_nlApril 4, 2019
Signs are emerging that a stock market crash may be coming. The current 10-year bull market is the longest in history.
The bond yield curve is trending toward an inversion, with longer term interest rates lower than short-term yields; historically, the inversion of the yield preceded many U.S. recessions. For example, the curve inverted in 2007 before the U.S. equity market collapsed.
While the only guaranteed way to protect your money from the next crash is to avoid investing in the market, the average 9% stock market return from long-term investments may be worth it. If history is a valid guide, patient investors will profit from risking a portion of their money.
Reduce permanent capital losses. When stock prices decline, investors must pause and think. “The most important strategy for investors worried about the next bear market is to reduce the risk of a permanent loss of capital,” says Daniel Kern, chief investment officer at TFC Financial Management in Boston.
It’s natural to want to ease the pain of a stock market loss by selling and leaving the stock market altogether. Investors who make this fatal step, let their emotions dictate their decision-making and ultimately turn a temporary loss into a permanent one. Research shows that investors who sell after a market drop have lower long-term returns than those who hold on and wait for the market to rebound.
Prepare in advance for a stock crash. Implementing well-respected portfolio management strategies and creating an appropriate mix of stocks, bonds and cash for one’s age, time horizon and risk tolerance can set investors up to handle the next stock crash.
Gage DeYoung, founder of Prudent Wealthcare in Denver, found that a balanced portfolio of 50 percent stocks, 40 percent bonds and 10 percent cash would have lost about 19 percent of its value from November 2007 to February 2009 during the Great Recession; that's based on a study using financial planning software. A conservative portfolio with 20 percent stocks 50 percent bonds and 30 percent cash would have suffered a small 3 percent loss during that same time, according to his analysis. – Barbara Friedberg
Comments
The markets are going to do what they are going to do. With this, and from my perspective, the best thing I can do is to build into my portfolio flexability to handle and deal with the forever changing market conditions. For me, my "all weather" asset allocation does this. The benefit of this asset allocation is that it provides me sufficient income, maximizes diversification, minimizes volatility, and provides long-term returns.
In addition, if you missed the thread titled "How Much Investment Risk Should You Take?" I have provided a link to it. Within the article is a link that provides information as how different asset allocation models have performed by year and over time. The 50/50 model has averaged an 8.5% return over an extended period of time.
https://mutualfundobserver.com/discuss/discussion/48886/how-much-investment-risk-should-you-take#latest
I wish all ... "Good Investing."
Mother portfolio adjusted 70s% bonds recently
Rather than trying to get in and out every other week, may I suggest everyone have a well thought out plan? Risk should, as always, be appropriate for age and circumstances. Sure - if you desire to “play” around the edges in an attempt to mitigate losses or take advantage of some opportunity you see, go ahead. But this idea of rushing in or out - particularly based on something aired on TV or published by a financial pundit - strikes me as ill conceived and downright dangerous to your long term financial well-being.
@JohnN - There’s a convenient edit button if you care to correct the spelling of crash. Sometimes appearance matters.
Yes, for the most part; I was being a smart arse. I grow tired of the site(s) pronouncements that arrive here. Too many posts have no input from the poster as to why such a site link may be of some consequence. Tis fairly simple to have at least a single sentence personal thought about the topic.
There are, without a doubt; valid investment thoughts here and there in the internet world that can arrive at MFO.
Being curious as to investment announcements, I poked through charts; using the tickers indicated and found nothing valid as to why one would want to invest in this area, based on this recent post shown next in bold. Apparently nothing more than a writing assignment. Had I posted the linked story, it would have been relative to the fact that I didn't see any confirmation that the investment areas had a positive return for an investor, versus other simple equity investment areas.
You Can Play the Flurry of M&A With Merger Arbitrage Fund
I received an email last year from a lady I've know for 40 years about a YouTube video she had seen about investing "now" in gold and silver, as the world was going to hell in a hand basket some day or another. I watched the short video and researched the author. My reply email was a background of the person trying the sell. She'd been involved in the precious metals market in a variety of positions for more than 20 years. Pure marketing to have an income.
Overall, with all of my warts and short comings as a person; I/we understand what we don't understand relative to investments and have a decent amount of critical thinking skills. IMHO these are very important to investing in particular, let alone everything else in life. So, yes; I tire of many of the pointless posts here. I do my best to post/respond to something I feel may be of consequence and valid for some here. Obviously, my viewpoint is only mine; and the value of a given link remains in the eye of the poster and the reader.
K. Too much ramble from me and my chores are now behind schedule to stay ahead of the rain.
Take care,
Catch
Regards,
Ted
@Catch22, You’re not rambling - just a little too complex perhaps for the intellectually challenged.
What I gleaned from your response to my question is that you’re not so much opposed to @John’s article’s focus on market crash as you are bothered by the often unsupported assertions that pop-up (usually in links) on the board from time to time. Good point. I agree. In fact, by performing a Google Search most any dimwit could dig up whatever predictive scenario they want to. Search for market crash and you’ll dig up half dozen or more compelling articles to that effect.
An equally compelling number of articles can be found making absurd pie-in-the-sky predictions to the contrary. S&P 3000 by the end of last year comes to mind. (We all know how that went.) Same goes for predictions about gold, bonds - or even rare whiskey (something for everyone here).
Catch - I think you’re saying (in a nice way) that links are cheap. The internet is filthy with different financial scenarios. But selectivity and objectivity in regards to those links are precious and in short supply. We stand as testament. Thank you.
Lead, follow, or get out of the way!!