There is a lot of talk that 2008 could be the year of an economic downturn and a stock market decline. I’m sure I will be getting some press requests to comment on what you should do to prepare your portfolio for a recession.
My Answer: Nothing more that you should be doing today.
- Check your portfolio to see if it needs rebalancing on every six months or when there is a market change of more than 10%.
- If your portfolio needs rebalancing, do it! Yes it will mean shifting more of your assets into downtrodden asset classes like real estate, but you will be buying more cheaply than those who did at the top of the market.
- Continue to invest. This is no time to stop investing for the long-run by trying to time the market. Although market timers sometimes are right about when a downturn is coming, they are rarely right about when it is time to get back in and are often left waiting on the sidelines as stocks rise. (If you think smart people can predict what will happen to stocks in the short run see my next blog on the latest installment of the Chicago Tribune’s stock picking contest.
- Keep your focus on your long-term goals and things you have the most control over your own spending choices.
I hope that you make great progress towards your goals in 2008!