Scary Dow Chart, Get Diversified

It was easy for investors to become complacent with their portfolios because over the last 25 years, from 1983 to 2007, stocks spent most of their time heading higher. Equity returns over this period are unmatched in modern economic history.  But complacency can threaten your portfolio because it prevents investors from adjusting to ever-changing economic fundamentals and an evolving investment profile.

When the fundamentals change, so must your portfolio. And as you advance towards your long-term financial goals, it is extremely important that your portfolio reflect your personal investment needs.

Here are a few questions you can ask yourself to determine if you are properly balanced:

1.) Do I have the right mix of stocks and bonds?
2.) Do I have exposure to high/ low risk segments of the market?
3.) Is my equity exposure balanced across key market criteria?
4.) How much of my portfolio value am I willing to risk?
5.) Should I have more money in cash?
6.) Am I on pace to reach my long-term financial goals? 

It’s not too late to get it right. Take control of your portfolio and your investments and give yourself the opportunity to recover from what has been a disastrous 18-month run in most markets. Take a look at the Dow chart below to see how stocks have struggled in this environment, emphasizing the importance of diversification.

 

5-Year Dow Chart

chart provided by eSignal

chart provided by eSignal

ABOUT THE AUTHOR

Michael Vodicka

Michael Vodicka is the president and founder of the Vodicka Group Inc., a licensed investment advisor (Series 65) and a financial journalist.