The current government shutdown in the United States provides for uncertainty that individuals, businesses, governments and markets dislike. The deadline for increasing the debt ceiling in the U.S. is quickly approaching and is another looming crisis if consensus cannot be reached. Uncertainty will lead to market volatility in the U.S. and around the world.
It is hard to believe that we have been here before in history and survived the battle, but we have, in fact many times. Markets have gone down and have rebounded sharply. What can anyone do to survive the battle and take advantage of this uncertainty?
Be diversified – don’t hold all your eggs in the same basket. Moving to cash will mean that all your eggs are in the cash basket. Trying to time the markets response and when to get back in is impossible to do, even for the most experienced.
Rebalance – good gains have been made in the U.S. market over the past couple of years. Your portfolio should have been rebalanced during this period. At market increases, portfolios should be taking some gains and rebalancing back to cash and at market declines, cash should be deployed at better prices to buy low.
Buy into the markets at these times – if you have cash to invest, think of deploying it during market uncertainty because at the height of uncertainty, opportunity knocks. A systematic approach through regular monthly purchases will take advantage of market declines while averaging out your “cost” over time.
Contact your advisor – call your “financial coach” during uncertain times to discuss strategies and potentially revisit your financial objectives and risk levels.
Breathe – as in any stressful situation, we need to breathe and de-stress. We have been here before and we will be again. The economics are not the same as 2008 and there is no reason to expect the same response.
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