Make a Long-Term Asset Allocation Plan and Stick To It
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If you’re nervous about investing in today’s volatile market, Eric Roseman says asking yourself three fundamental questions can help set you on the right track. 1) Are you looking for a dollar or a euro-based portfolio? 2) What’s your growth horizon and risk objectives? 3) What is your asset allocation?
As I said yesterday, readers always ask me how to time the markets. And I always reply the same: Make a long-term asset allocation game plan and stick to it.
Honestly, it’s easier than it sounds. You really just need to answer three questions.
The first question is: “Are you looking for a dollar or a euro-based portfolio?” If it’s the latter, you can achieve that at iron-clad foreign banks (my favorites are in Europe). Remember, unless you invest in a tax-deferred offshore variable annuity or an IRA, you can’t buy offshore mutual funds. But the entire gamut of global securities is indeed available, including stocks, bonds, and foreign currencies.
Next, determine your growth horizon and risk objectives. How many years can you be invested in the market? Can you stomach a bear market (like now), or sudden market declines? If your plan is to stay invested, then consider at least a five-year plan. Stocks generally rise over a full five-year cycle, so try to stay invested through thick and thin.
Finally, determining your asset allocation is by far the most critical objective at this stage.
In other words, how much should you allocate to stocks or equity funds, hedge funds, hybrid funds and exchange traded funds? Don’t forget to reduce portfolio risk by including investments that negatively correlate to stocks, like commodities and currencies.
Sitting down with a pen and paper is a good way to begin deciphering your long-term investment objectives.
Source: What’s Even Better Than Trying to ‘Time’
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Tags: bear market, Corporate Bonds, Downturn Strategy, Eric Roseman, US stocksAbout the Author
Eric serves as an editor and Investment Director for The Sovereign Society's Commodity Trend Alert. Eric's talents include blending a dozen or more alternative investment funds to produce consistent returns to traditional asset classes and making commodity based recommendations with huge upside and limited downside.
The Offshore A-Letter specializes is an elite global investment opportunities, asset protection strategies, tax management solutions, second citizenship and residency programs and offshore structures.