It’s important to remember that equities have been a powerful tool for wealth preservation and accumulation over time, despite many downturns (“corrections”) and often more severe than what we have recently experienced. The economy has weathered prior periods of tight credit, poor corporate earnings, high inflation, wars and political uncertainty and gone on to reward investors who have the patience and fortitude to stay invested.
Don’t try to time the market. Moving in and out of the market requires a high degree of accuracy and probably a healthy dose of luck – for it to bear fruit.
Your goal as an investor should be to set an asset allocation model that will achieve financial objectives for the long term 3-5 years, with downside risk limited to a level that can be accepted in difficult markets. Market declines potentially create two opportunities. The first is the opportunity to purchase mutual funds and stocks at low overall costs and the second is to rebalance to the allocation target. While timing will never be perfect, rebalancing allows you to reduce holdings in “expensive” categories and increase them in “cheap” categories. Over time, you should expect such rebalancing to add to returns, and dampen downside risk.
Several steps to limit losses can be taken through:
· Broad diversification. By spreading equity investments across different geographies, capitalization and styles, you look to avoid the severe declines that can accompany concentrated portfolios.
· Fixed Income. REIT’s paying a steady dividend with an opportunity for growth in the future. High quality Bond funds.
· Manager/fund selection. One important criterion to use in selecting mutual funds – is performance in down markets. You should continually look to purchase mutual funds and identity fund managers that are very value driven. While no strategy works universally, on average we expect the managers of these funds to do better than the market when it declines.
Past performance is no guarantee of future results. Mutual funds are sold only by prospectus. Investments in these vehicles may either gain or lose value. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest. Securities offered through Crown Capital Securities, LP; member FINRA/SIPC