A Look Two Years Back and How to Invest Today

Two years ago on August 2, 2011, the S&P downgraded the U.S. Credit rating for first time in modern history. The Federal debt-ceiling crisis came and went, and we are still alive but not without uncertainty and confusion.

Let’s look at the headlines from two years ago:

Asian shares extended their slide today, gold hit a record and Treasury yields fell.  – Wall Street Journal, August 8, 2011

Employers reduced hiring. The unemployment rate rose to 9.2%, the highest level this year.  – Martin Crutsinger, AP Economics Writer, August 2, 2011

During the last week of July, investors pulled more money out of money-market mutual funds than any week this year with about 70% of the redemptions coming from institutional funds that invest in U.S. government securities.  – www.fa-mag.com, August 1, 2011

Renewed worries over the state of the economy pushed U.S. stocks to their longest losing streak in nearly three years.  – Wall Street Journal, August 1, 2011

Economists trimmed their forecasts for the second half of the year.  – Martin Crutsinger, AP Economics Writer, August 2, 201

And yet, here we are today, two years later. The world has not come to an end. But uncertainty and fear continue.

The average American continues to go to work, raise children, visit grandchildren and cut his lawns. The average business continues to look for opportunities to manufacture or market their products. People continue to consume food, clothing, goods and services.

So what should a prudent investor do during uncertain times? The only way I know to answer this question is to first remember four key cornerstones of prudent investing, which we believe are more accurate than ever:

  1. There are no safe havens.
  2. Market timing is hazardous.
  3. Concentrated portfolios are risky.
  4. Emotions are more powerful than logic

Therefore, we recommend the prudent investor consider:

  1. Global diversification
  2. Low-cost asset class and index-type stock and bond funds
  3. A risk-appropriate portfolio allocation using multiple asset classes
  4. A disciplined, periodic rebalancing to take advantage of market and investment volatility

Take personal responsibility to employ the tools and techniques that have successfully guided thousands of investors through the uncertainties and fears of life with a successful investment experience.  Do not let the inevitable uncertainties and fears derail your investment discipline.

For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s newest white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.