Value in the Game Plan
I’m writing this on Super Bowl Sunday and really want to emphasize how important game plans can be. The past few weeks have brought a decent rise to the U.S. equity markets. Many clients are feeling confident again and letting go of the nervousness that persisted throughout late 2011. Now, it’s my turn to be nervous.
I find it easier to execute game plans when valuations are low and can feel a bit nervous when they are at multi-year highs.
Game plans get you through. Game plans get me through too.
Valuations, Yields & Staying the Course
Parts of the Plan
Buying investments low and at a good value has seemed fairly easy in the recent past. Especially for those investors with a long-term horizon. Although good values still exist, it is time to be a bit more cautious. One should not overlook the rise that 2012 has brought. Please consider dollar-cost-averaging into purchases even though it is not a guarantee for loss prevention, it may help.
Yields on U.S. Treasuries and many other bonds are very low. Their prices are still quite high even though some investors have obviously moved back into equities. Nervous investors often sit in these “safe” investments too long or pay too much for them. Even when feeling a bit nervous, it potentially pays to look at higher yielding investments with a portion of your portfolio. In other words, maintain some balance between asset classes. Let’s not run too fast one way or the other.
Staying the course means that we stick to the game plan. My game plan includes systematic investing, quarterly rebalancing, and profit taking where appropriate. Nervousness often subsides when you take action that isn’t predicated on a daily move or headline news. Markets can move dramatically both directions. Your investment game plan should not.
Let’s hope the recent rally holds. Let’s not be too exuberant and overweight asset classes that have already rallied.
Until next week,
Susan R. Linkous
Notes: Dollar-cost averaging involves systematic purchases regardless of price; please consider your ability to do so. Bonds are subject to market and interest rate risk if sold prior to maturity.
Quote of the Week
“What happens is not as important as how you react to what happens.”