“Our clients come to us for advice on how to protect their future. We take that level of trust very seriously.”
- Dan Junkin

Suppose You Knew... - Third Quarter, 2007

Dan Junkin

Suppose you knew that — long term — the stock market was the most productive of the normal investment classes. And, suppose you knew that the market was going to have a down-turn. What would you do?

You might decide, in that circumstance, to lighten up on stocks — put more money into bonds or money market funds.

The problem is that you don’t know when the down-turn will begin or how long it will last. What we are talking about is market timing — moving from one asset class to another and, then, back again. Long term studies have shown that market timing is a no-win game, because of the unknown critical element of time.

If you think the stock market is the most productive asset class -- and studies have shown that it is — then you want to have an appropriate long term exposure to stocks. But what do you do if you suspect the stock market may go down?

You could time it, but that involves getting out and then getting back in — both at the right time. The right time is important because if you miss a productive period in stocks before or after a correction, you could damage your long term return.

Because of the inherent difficulties (some would say, impossibility) with timing, we at InvesTrust strongly recommend a stable, long term asset allocation.

Based upon your age and your tolerance for risk and return expectations, develop an overarching set of exposures to the stock market, bonds, cash — and stick with it. As you approach retirement or some other specific event in your life, you may want to modify that framework. But we urge you not to try to catch or avoid this or that expected upward or threatened downward move in the markets. The timing is just too difficult — and the risk is too great that more harm than good will be done.

Please call us if we can be any help with this question or any others involving your planning for your financial future.

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