"Is The Sky Falling!?!" Preparing A Financial Portfolio Ready For Any Market


Honestly, today's news reminds me of being on the debate team in high school. (In fact my first kiss was in a library at debate camp, but we can discuss that at a different time.) 

In virtually every debate we would try to prove why the other team’s argument would inevitably lead to natural disaster, nuclear war, and the end of civilization as we know it. Do you ever sense a similar strategy when reading headlines? Death and destruction, sex and scandal - these things sell. Fear sells.

It’s tough to live in a soundbite culture! Media, and financial media specifically, has decided the best way to get our attention is to constantly inform us that the bottom is about to drop out.


But what are we supposed to do with all this negative information?


I was recently driving and listening to a financial planner being interviewed. The stubborn news anchor kept hammering him with the same questions: “Is recession coming? Are we about to enter the next major recession? Could the coming recession be worse than 2008?” The planner finally caved in and spoke of a recession with a few “though we can’t be sure” comments thrown in for good measure.

As I listened, I kept wondering how all the viewers were supposed to respond to the threat of recession. They couldn’t do a thing to impact whether a downturn was coming. They certainly couldn’t change the global economic picture, the debts of various countries, or the mounting student loan crisis in America.


I Have An Important Question

While it may be an interesting mental exercise to theorize about when a recession may come, I think there is a far more important question: 

If I actually knew the exact day that the next recession would hit, and I shared it with you, what would you do with that information?

How would you practically respond?  Would you run to your computer and begin adjusting all your investments? If so, then that’s a big warning sign that you’re not currently invested the right way!

Let’s be straight about this - No one. Not me, not Janet Yellen, and certainly not Fox Business - has any idea when the next recession will come. But it will come! There is no doubt we will experience volatility in the future!


Can Your Portfolio Be Disaster-Ready?


Let’s spend less time trying to figure out the exact timing of a recession, and more time creating a portfolio that we can trust to take us through the good and the bad times. This goes back to the “If-Then” planning that I refer to so often.

If your portfolio will only work when the market is going up, then you're setting yourself up for a lot of anxiety and heartache the next time that the market (inevitably) drops. Instead build a portfolio with the expectation that the market will experience volatility, that way you can just change the channel next time the media threatens the end of the world.

If you’re not sure how the next bout of volatility will impact your portfolio, a simple evaluation can help you understand some good next steps.