Update: This article was updated to reflect the news that for or the 90 days of fall (9/21 – 12/21) the S&P 500 was down 17.5%. The market correction happened sooner than I expected. The advice I’ve dispensed for the past 30 years since leaving my early career on Wall Street is timeless, except for the section on lightening holding of large capitalization stocks. Don’t do that now in response to the market, obviously, unless you have a new preferred allocation based on other factors besides fear.
The simple macroeconomic assumption of my own investment policy is that the long growth market ended almost a year ago. Stock prices were temporarily boosted and held up in 2018 by an artificial stimulus of the corporate tax cut but now that effect is wearing off and the 2019 correction will be more painful than it might have been without the stimulus.
What to do now? Simple. Lighten up on stocks, especially large US or major market stocks. Look for diversification in alternative undervalued investments for at least a small percentage of your long term portfolio. I’m finding plenty of undervalued opportunities in aquaculture infrastructure that enjoys tax benefits and is intended to support a coming boom in that industry.
While tax saving opportunities can be an added bonus to an investment strategy, it should not be the primary driver.
What hasn’t changed and what will never change is that investors should be guided by a well-considered personal investment policy. My lifelong message to investors has never changed, in boom years or during a market crash. Do the right thing with your money; besides being the source of your financial security, it is one of your most powerful tools to make the world a better place. Make a difference in the world. Let your investments be the change you want to see happen. Be bold and brave in investment decisions; high returns always come with high initial risk. Have a long term outlook. Diversify. Keep asking questions. Be personally involved in creating your investment return. Don’t be a slave to the stock market. Don’t invest because that’s what you are told that all good sheep do. Unfortunately, it often takes a market crash before people really seriously question the underlying values basis of their own personal investment strategies.
Disclosure: I was formerly a SEC and PA Registered Investment Adviser but no longer work in that role. This blog post is only an expression of personal opinion and philosophy and not meant as specific investment advice to any reader.