Is It Time To Re-examine Your Portfolio Blend?

Is It Time To Re-examine Your Portfolio Blend? Examine If Market Retreat Creates A Long-Term Buying Opportunity The stock market’s mid-summer swoon took investors on a harrowing ride, culminating with several days of triple-digit losses, a few days of triple-digit gains, and an overall performance that, in the process, pushed the Dow Jones Industrial Average into negative performance territory for the year. The reasons behind the downturn were many, but were largely focused on the following: Washington legislators displayed a lack of unity and, therefore, created concern among investors by exhibiting weeks of indecision before finding an eleventh-hour, short-term fix to the nation’s deepening long-term debt woes. Rating agency Standard & Poor’s responded by downgrading U.S. government debt (from AAA to AA+) for the first time in history. Much of the economic data released leading up to the market’s roller coaster ride not only reinforced the fact that America has a feeble economy but fed growing fears among market prognosticators and investors in general of a double-dip recession. While individuals seeking growth endured paper losses amid the downturn, the decline gave rise to good news for those with cash in reserve and a long-term investment horizon (five years or more). Stocks, as represented by the Standard & Poor’s 500, are now selling at levels not seen since the market correction in the autumn of 2008. What’s more, dividend yields on many high-quality, well-established corporations are now high compared to the scant yields on 10-year government debt securities. Whether you are investing for retirement or a child’s college education, or simply would like to build wealth for an undetermined long-term goal, market downturns of this magnitude create investment opportunities to purchase stock at prices that are typically available only once every few years, though past performance is no guarantee of future success. Indeed, there’s no near-term guarantee that the summer market meltdown is not part of a slide that carries forward into the months ahead. After all, Washington politicians still have to find a solution to tackle the damaging debt crisis, another downgrade of U.S. government securities by S&P or another ratings agency remains a possibility, though, at this juncture, unlikely, and few seasoned market observers believe the country’s economic troubles will reverse course in a meaningful way anytime soon with the employment picture remaining so uncertain and consumer confidence still shaky.

The best advice in seeking long-term goals:

In the wake of the changing market landscape, now may be a good time to revisit your investment plan and overall strategy to identify investment opportunities that have emerged which could help enhance your ability to achieve your long-range objectives. If the market downturn has been unsettling for you (and who can blame you if it has?) perhaps its time to revisit the risk exposure in your portfolio allocation to best reflect your risk tolerance level and ability to sleep.

Copyright 2011 Ian Hurwitz “Is It Time To Re-examine Your Portfolio Blend?“

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