Bull or Bear Market – Who Cares? With the Right Portfolio, It Shouldn't Matter

Investors with a solid plan in place can ride out the ups and downs without breaking a sweat.

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Volatility, that old villain, is at it again, putting stock market investors back on edge.

What seemed to be an endless tunnel of love turned into a funhouse ride in February, with the Dow marking its biggest single-day point drop on Feb. 5 — plunging nearly 1,600 points before recovering somewhat to close down 1,175.

What happened? No one knows for sure. Based on key indicators (employment, inflation, consumer and investor activity), everything appeared to be going just fine. But the markets are predictably unpredictable.

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Of course, the pundits had plenty of theories, along with ideas for what investors should do next. It’s their job, after all, to make you listen and then talk (or tweet) to others about what you heard them say. They’re selling the news — and themselves. But unless you’re a day trader, the short-term intrigues of the markets really shouldn’t have much of an effect on what you do with your retirement savings.

If your portfolio is set up to fit with where you are in your life and who you are as an investor, you can avoid the upset and turn the channel. (I do.) Or you could watch, if you want, knowing you’re not going to experience any big surprises.

How can you get your portfolio to that place and potentially avoid another white-knuckle ride?

1. Head off hysteria with a proactive design

Diversification is key, and that means allocating your money across many asset classes and categories — not just two or three or even five. Make sure your mutual funds aren’t all invested in the same stocks. (Overlap is one of the most common problems we find.) And think beyond stocks and bonds: Consider including other options, such as fixed-income securities, real estate, commodities, hedge funds or tradable collectibles like coins.

Non-correlated assets can stabilize your portfolio. As market conditions change, an upswing in one asset class may help offset a drop in another.

2. Know your risk tolerance

The financial industry tends to label investors as conservative, moderate or aggressive. But we’ve learned over the years that those terms mean different things to different people — including the financial professionals who use them. Now, there are software programs, such as Riskalyze, that can better pinpoint where your comfort level lies — how you feel about certain vs. random outcomes — and determine what your portfolio should look like to suit your individual risk tolerance.

We also can stress test your current or proposed portfolio to see how it would hold up under certain scenarios — such as the crashes in 2000 or 2008. It’s the downside that changes lives. Knowing what to expect can keep you from making emotional decisions when the markets (and the pundits) start getting scary.

3. Have a purpose for your investments

Too often, investors end up with a prepackaged product or strategy, and they have no idea what it’s for. They don’t know if it’s income- or growth-driven, or if it’s part of a long- or short-term plan. It’s just something an adviser — or brother-in-law or colleague — told them they should do. But it’s important to inform yourself about what you have in your portfolio and why you have it. Especially if you are near or in retirement, you should get away from the idea that it’s all about rate of return and turn your attention to protecting your nest egg for the long haul.

If your portfolio is designed and implemented specifically for you — and is consistent with your financial situation, your needs and your personality — you should be able to ride out the market’s ups and down without letting emotions get the better of you. Every investment carries some risk, but you can improve your chances of success — and your everyday comfort level — with a solid, individualized plan.

Kim Franke-Folstad contributed to this article.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Heise Advisory Group are not affiliated companies. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. AW05183324


The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Ken Heise, Investor Adviser Representative
Co-founder and Financial Adviser, Heise Advisory Group

Ken Heise is co-founder and president of the St. Louis-based Heise Advisory Group (www.heiseadvisorygroup.com). He is an Investment Adviser Representative and a Registered Financial Consultant, a designation awarded by the International Association of Registered Financial Consultants to advisers who meet high standards of education, experience and integrity.