Staying Comfortable

How do you stay calm when the market is crazy?

 

 

Drawing of Valkyries. Illustration: Johannes Gehrts. Source: Wikimedia

Birgit Nilsson was a great dramatic soprano. One day an interviewer asked what was the key to successfully performing in demanding roles like Brunhilde and Isolde. Her answer was immediate and a little surprising: comfortable shoes. Some of the operas required Nilsson to stand in place – on her feet, singing – for hours at a time. If her feet started to hurt, it would be hard to stay focused.

When investors face demanding times like the ones we are in, they need to be sure they are comfortable. Media will fill the airwaves with stories of the bitcoin meltdown and rising inflation and other dramatic news. Falling stock prices evoke memories of the financial crisis or the dot-com meltdown or the Euro crisis. It’s easy to panic: we don’t want to go through those times again.

That’s why it’s crucial to have a portfolio you’re comfortable with. If it’s something you don’t worry about – if you contribute to a 401(k) and don’t even bother to open your statements – then you can afford to own volatile assets that jump around: like small cap or emerging market stocks. These tend to have the best growth. If you’re worried the next downturn will give you heart failure, then maybe you mostly need short term government bonds. If you want both growth and stability, then a mixture is best: large cap stocks, small cap, global securities, corporate and government bonds, etc. Higher average returns also experience larger drawdowns.

Source: myjourneytomillions.com

The key to performing a challenging vocal role is to stay relaxed and to wear comfortable clothes. The key to persevering in challenging markets is to have a diversified portfolio. Because if you can get through the tough times, the long-term performance should make you want to applaud.

Douglas R. Tengdin, CFA

By |2018-02-22T07:36:36+00:00February 22nd, 2018|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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