Let’s think back to the third quarter of 2019. We are sitting in an investment strategy meeting and all of the sudden a tip from the future comes in.
“Over the next 12 months there is going to be a virus that spreads worldwide, completely shutting down businesses, air travel, entertainment and schools. Ultimately there will be over 180,000 people that die in the US alone.”
That is all of the information we get, and now we have to make a decision on how to invest over the coming months. Almost anyone who makes investment decisions would initially think, “Wow that sounds worse than anything we have ever experienced. Lets just be safe and hold cash. That sounds like a worst case scenario for economic conditions.”
And everyone who thought that would have been absolutely wrong, to this point. Almost every other asset class has far outperformed cash in the last year. Stocks? Outperformed. Bonds? Outperformed. Precious Metals (Gold and Silver)? Outperformed. Most other commodities? Outperformed.
Now that markets are at all time highs and we are sitting in an election year, what happens next? No one has any idea. But what we should have learned over the last year is that diversification is key. This spreads around your risk for when markets get volatile.
If your long term situation or goals have changed, then you should revisit how you are invested and see if changes to investment your allocation should be made. If you are worried about what might happen next, then my advice would be to look past the short term noise so you stay on track. Your future depends on it.