Join Jackie Ann Patterson LIVE at The MoneyShow Seattle!

Join Jackie Ann Patterson LIVE at The MoneyShow Seattle!

Like a Cable Car in SF, Check Your Brakes When Market Heads Downhill

08/22/2018 5:17 pm EST


Jackie Ann Patterson

Author, Truth About ETF Rotation

Can you imagine taking a cable car down San Francisco’s Hyde Street without brakes? If your car didn’t have brakes, how fast would you drive, asks Jackie Ann Patterson, who's presenting at MoneyShow San Francisco  August 24.

Probably not fast at all because, as all drivers know, gripping the steering wheel tighter is not a means to slow down.  

Yet, “common wisdom” has it that we should plunk down our life savings into investment funds, and white-knuckle it through downturns with nary a thought of ever getting out.  Ok, if that’s the only way, it is only a small chunk of cash that I’m willing to invest and the rest goes under my mattress!

I’ve seen too many crashes, meltdowns, corrections, and interest rate adjustments over the last 25 years to be confident in buy and hold as a large-scale strategy.  

Of course, the individual companies come and go.  For every Apple (AAPL) and Amazon (AMZN), we have Digital Equipment Corp. and Borders Books. Remember them?

Diversification helps but it’s no panacea. In every downturn since the millennium, when the market moves down, it takes about everything with it. It is said that a rising tide lifts all boats. True enough, and when the market flushes, everything goes down the drain.

It used to be that keeping a hefty portion of your assets in bonds was the way to safety and stability for your portfolio. In the past, bonds have traded opposite stocks and commodities, protecting portfolios when the market stalled like a tourist with a clutch at the stop sign on top Greenwich Street and Leavenworth.  

Now, with the specter of rising rates in front of us, those who hold bonds may pay a heavy price for that so-called safety. When interest rates rise, bond values go down – it’s almost a law of physics.

Bond funds can be particularly hard hit.

What’s a prudent investor to do?

To be comfortable with my investments, I need to know how to control speed when the market heads downhill faster than an electric scooter on Filbert Street.  

Asset allocation is a great way to do just that. I’ve spent years researching investment strategies and am happy to share my results.

Keep a watch on which assets are doing well and be prepared to shift gears according to the current terrain.  When stocks are flying – go with it. Time to hit the brakes? Load up on bonds.  

Now let’s get more specific about how to tell which assets are the most promising at any given time.  

First off, make an objective rule to guide your decision-making and help you rise beyond the noise of the day.  One simple rule to is look at performance over the last six months to a year.

Check your speed often. The world moves fast.  Waiting to the end of the month or end of the quarter can have you late to the race.  

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