Dipping Your Toes In, Wading, or Body Surfing: Themes of Protection
After the rollercoaster ride of December 2018 when the markets seemed to be on one of those really big descents that gives the rider that belly flip sensation, we ascended up the next hill quite steadily, having a terrific January and continuing to see some good performance in February (the hills were a lot smaller on the coaster). But where is the roller coaster going from here? Well, nobody can be 100% certain (if we could be none of us would be working because we would all be so rich from our crystal ball foreseeing the future). We need to keep our eyes on fundamentals and we need to consider how we felt during the “big dips” and up and down sections of the roller coaster ride. There are many things that can impact financial market performance. Please visit my website www.capitalfinancialplanning.net under the LPL tab for weekly market and economic commentaries from the research department at LPL Financial as a resource to help you keep abreast.
As investors, there are some strategies that might be employed to help ease the “extremes”. Based on your risk tolerance and time horizon, you might seek to temper the risk of declines with downside protection, noting that this may impact your upside potential by reducing or capping it. There are products that might assist toward this, but they may be more complex and require a full understanding of both benefits and risks. You might look toward your asset allocation and certain strategies therein, seeking to understand how certain asset classes behave in various market conditions - and understanding that there is no “magic formula” - that asset allocation strategies do not guarantee against a loss or ensure the acquisition of a profit. This is an opportunity for a conversation about risk and your personal attitudes toward it.
Speak with your financial advisor about your comfort level - whether you want to dip your toes in (have a small amount of exposure to risk), wade in the water up to your knees (a little bit more exposure to risk), or that you want to body surf and ride the waves up and down (higher level of exposure to risk) seeking the opportunity for the greatest potential reward. The risk-reward ratio is something that is personal to each individual and may be influenced by the proximity to a goal or deadline and whether there is a lot of time or very little, the amount of other assets owned and accessible, special needs and circumstances facing the investor, and more.
The opinions are those of the author and are provided for general educational purposes only and are not intended to provide specific advice to any individual. Seek professional advice before taking any action in regard to your finances.
Todd A. Slingerland, CFP®
6 Tower Place Albany, NY 12203 (518) 867-4000 x105 firstname.lastname@example.org www.capitalfinancialplanning.net