There’s been a lot of worldwide political uncertainty to the start of 2022. Inflation concerns and possibly upcoming interest rate hikes were top of mind in January, and now we have Russia’s invasion of Ukraine with airstrikes in the capital and other cities.
Uncertainty and geopolitical turmoil can definitely shock stock and bond markets. Today, Feb. 24th we saw the S&P 500 DOWN 2.45% at breakfast and by our midafternoon snack it finished the day UP 1.44% - that’s over a 4% swing in one single day. Markets move quickly to the down- and upside.
As this turmoil relates to your retirement portfolio, what can you do about it?
First, an understanding and an appreciation that we have it pretty good here – we are well insulated on our side of the world, so we’re lucky to not have to face those concerns of being invaded. But as it relates to our retirement portfolio, understand markets move quickly, so stay invested every day – you’re not gonna pick the right time to be in or out. Remember market down moves are temporary, but market up moves are permanent. It just takes time, and if you have a heavy stock exposure already, that means you already knew and understood that time is on your side and you have to be invested for the long-run. Secondly, diversification is - and will always be - your friend. Having exposure to big and small companies in the US, having exposure to established international companies, and incorporating some emerging market and global real estate exposure will help to smooth out the volatility and offer some baked in protection. And then lastly, you look for opportunities to take money from areas that have done really well and shift that into areas that haven’t done so well - this is called rebalancing. Stay with that approach over the long-term - and long-term is several years - and decades and your resolve will be rewarded with a sizeable nest egg to ensure a safe, secure and comfortable retirement. If you’re not comfortable doing this on your own, reach out to me at pen-fin.com.
To watch this blog post as a video go here.