Every time, we get a crisis in the stock market. The US Stock Index in 2020 due to the Covid -19 epidemic and re -collapsed in 2023 when the Federal Reserve began to increase interest rates. Now we have tariffs.
Time will tell how it shakes, but if we look back, there are some lessons worth reviewing history.
The US stock market has been incredibly flexible. Whether it is the weather disaster, terrorist attack, war, epidemic or some other crisis, we have survived.
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Not only this, but if you look at the returns of the US stock market after the fall in the previous stock market, the next 12 months were mostly suited – but only when you were fully invested.
Studies have shown that if you remember a few big days in the market, your return may be quite low.
Real risk When the stock falls rapidly in a few days, it may occur nervous-racking. It is uncertain that the stock market is afraid. But market volatility may be rewarded, as stocks have historically returned more than bonds and cash.
And you may need that reward to beat your portfolio, ie inflation and actual risks of taxes. Inflation and taxes are like silent killers for portfolio over time, gradually eradicate your ability to maintain your standard of living.
And that’s why you may need stock, because when returning in 1926, shares have historically given the best performance keeping in mind inflation and taxes.
What to do? In the past, being diverse has helped. A diverse portfolio can be a mixture of the US and international stock, bonds, gold, real estate, private investment and other investments based on the risk tolerance of a individual investor.
If you are a baseball manager, will you keep all your players on the shortstop? No, you will sprinkle them around the ground to increase the obstacles of catching a ball. The same thing with investment: Sprinkle money all around to catch different markets.
Giving guarantee has helped my customers. When everything is failing around you, it is that you appreciate the guarantee.
Anructions can guarantee. The entire life insurance is a guaranteed cash value. Structured notes provide some guarantee. Guarantees are like a car warranty as the owner: you never appreciate it until the cheese breaks.
what not to do? Serving You may regret something after 12 months by making a grain decision. Give time and location to reflect yourself. When do you need money? Do you need it at once?
Stay calm, talk to your financial advisor, evaluate your situation, then make thoughtful adjustments on need.
final thoughts This kind of time can be disappointing. Especially if you only put money in the stock market. But before you beat yourself too much, review the previous lessons above. The US stock market has become incredibly flexible over time, and time heals most wounds.
You can also use this experience as a warning signal – how can you prepare for the next major stock market sale? Having a cash reserve or constructing more diverse portfolio can help.
Some guarantee or security can also help. It is like a proverb “Once fools me, shame on you, fool me twice, shame me.”
Never let a good crisis ruin – use it to create a more flexible portfolio for next time.
For more information about creating a more flexible portfolio, please email the author, Michael Aloi But maloi@sfr1.com ,
Investment Advisor and Financial Planning Services are offered through Summit Financial LLC, an SEC registered investment advisor, 4 campus drives, passipney, NJ07054. 973-285-3600. This material is for your information and guidance and it is not as legal or tax advice. Customers should take all decisions about taxes and legal implications of their investment and plans after consulting their independent taxes or legal advisors. Individual investor portfolio should be created based on individual’s financial resources, investment goals, risk tolerance, investment time horizon, tax status and other relevant factors. Past performance is not a guarantee of future results. The idea and opinion expressed in this article belong only to the author and should not be held responsible for the Summit Financial LLC. The summit is not responsible for the hyperlink and any external referred to the article.
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