For those of you who attended McClelland University earlier this month, this will be a refresher. President and founder of The McClelland Financial Group, Rob McClelland, opened the event with his presentation entitled, “How to survive the coming bear market”. By the end of the presentation, the general feeling was “I need to embrace the coming bear market”.
It is not a surprise that the term “bear market” frightens investors. What should I do to prepare for the market drop? What can I do to ensure my portfolio weathers the storm? These common questions should be met with the same mundane answer…nothing.
Changes initiated by speculation only do damage to the long term performance of a portfolio. Investors are better off leaving their portfolios untouched, riding the volatility and rebalancing their portfolio as necessary. According to Boston research firm Dalbar Inc., the average investor in stock mutual funds achieved a 3.8% annualized rate of return over the past 30 years vs. the S&P500’s average of 11.1% for the same time period. The difference in return is attributed to investors buying and selling their funds at all the wrong times.
Buy and hold may sound cliché, but the fact remains, this is the right way to INVEST. An investor would be better served by working with their advisor to build an investment portfolio that accurately reflects their true risk tolerance. An appropriate mix of stocks and bonds will allow for upside capture and protection on the downside.
Volatility is the only certainty in the market. Use it to your advantage by rebalancing to your target asset mix. What is rebalancing? Simply put, it is an unemotional way to buying low and selling high. Emotion is your worst enemy when it comes to investing. Take it out of the equation and bear markets will be something cheered instead of feared.