Like many advisers, we have received numerous calls from clients, asking what to do in this turbulent and scary environment.  There are some basic lessons that can serve us all well at this time.

First, the essential rule in investing is to buy low and sell high. So, for those who are asking “should I sell everything”, the answer is no.  Unless there are circumstances like having to sell, or you own essentially bad investments, do not sell.

Here are some additional thoughts that might of benefit as you watch the volatility in the investment markets. Don’t buy investments you don’t understand.  This is the single thing that has caused so much of the difficulty we currently find ourselves in. Absolutely maintain diversification. In case you haven’t noticed it, there are segments of the market that are doing quite well. Never chase yield; if an investment is showing an unusually high yield, there is generally a cause for caution. Be very skeptical about what you read and hear.  The media is not wiser than you, you can find the opposite opinion on every subject in print or on the air.

Don’t buy company stock in your retirement plan.  Learn from the horrific experiences of participants in Enron and Bear Stearns 401k plans. Don’t accept company stock instead of cash. Options and stock purchase plans can be rewarding, but cash carries no risk of being valueless. Maintain adequate cash reserves in insured accounts. Not only is this prudent, but it also gives you the opportunity to take advantage of bargains.

Don’t buy a house you can’t afford. Don’t put all or most of your money in a single thing, not your house or a bank. This is the same as making a big bet on a single stock.  Never buy individual securities; there are other options that will make diversification easier: mutual funds, unit trusts, etfs, etc.

Try to build a portfolio based on your situation – if you are a retiree, you portfolio should be very different than that of a young couple just starting out.

Our economy and our financial system have weathered bad times before. Most fortunes have been built during times of uncertainty. This market will improve, maybe not today, but it will.  Those who remain committed to well selected, diversified investments will benefit the most from the inevitable recovery. For model portfolio examples, please contact us