If you're a golfer at Seville, you know that to go from the front and 9th hole to the 10th, you have to go through the tunnel under Clubhouse Drive. As you decide to enter the tunnel, you have the choice to essentially go right or left- right to the 18th (and a potential collision) or left, to the 10th tee. Entering the tunnel presents you with a decision, or a "why." So I ask you... why do you do the things you do in your investment decisions?
The construct of a properly balanced portfolio is different for everybody. Some potential factors in the formulation of your balance of securities may include the time projected to be invested, tax ramifications, liquidity needed including the market availability to buy your investment, diversification, and other personal inclusions needed to hopefully achieve your goals. The economic conditions surrounding us also have an effect on the potential gains or losses that may prevail- our current administration as an example. Not getting into politics, we are all aware of the way a tweet or statement can blow the market in either direction. Crafting what may be perceived as a "balanced portfolio" may be a bit tricky at any time in the cycle, with so many factors blowing the closing numbers each day willy-nilly. Yes, I agree that for the past 15 months or so the direction has been for the most part in a positive direction, but what do you do to take advantage of it, or to foresee when it will turn negative?
If you are in a company retirement plan such as a 401(k), Tax Sheltered Annuity, IRA or any variation thereof, your task is two-fold... to be the one to actually put the money in (not counting your match, if available) and to allocate it based on the investment options available to you within the plan. My experience, after working with thousands of folks just like you, are that most folks do their due diligence when first getting into the plan, and then, many years later, are still in the same allocation set when making their first contribution. It usually starts with asking a work-mate what they are invested in, or "throwing darts" to make your selections and then letting it ride. The problem is, the market is a constantly evolving being, proving from year to year the choice sectors or selections change, and the old theory of buy and hold may not work to your advantage- what is the best performer one year may be the dog of the next. The end ramification is simple- as the old saying goes- you get back what you put in. In this case, meaning that it takes time, research and planning to make the most of your investment retirement planning- and a bit of luck as well. The market has no guarantees, and as we know, past performance is no indication of future performance. But, not opening your statements or ignoring your asset allocation is not the best way to maximize your potential returns.
So where does that leave you in planning your future? Do your homework. Listen to the news. Research the different sectors, countries, and areas of the markets- domestic, global and internationally. Know the difference between and stock and a bond, and how they react to a change in interest rates or a tweet from the White House. Then, after playing the 9th hole, decide if you want to go right or left when you go under Clubhouse Drive- and hope you're on to a beautiful 10th hole, and not to a potential collision which may take years to recover from. If you're not sure, do yourself a favor- find yourself a good Certified Financial Planner® with a lot of experience and team up- those collisions can be very painful. I personally prefer a nice soft ride to the 10th... see you on the tee!