Solid asset allocation is the basis of sound investing. One of the reasons a diversified portfolio is so important is that strong performance of some investments may help offset poor performance by others. Even with an appropriate asset allocation, some parts of a portfolio may struggle at any given time. Diversification can't guarantee a profit or ensure against a loss, but it can help you balance risks.
If you feel you need to make changes in your portfolio, there are ways to do so short of a total makeover. You could test the waters by redirecting a small percentage of one asset class into another. You could put any new money into a type of investment you feel is well-positioned for the future. You could set a stop-loss order to prevent an investment from falling below a certain level, or have an informal threshold below which you will not allow a given investment to fall before selling. Getting expert help can assist you in determining which strategies might be most useful for you.
Even if you feel you need or want to adjust your portfolio during a period of turmoil, those adjustments don't have to happen all at once. Timing the market can be challenging under the best of circumstances; wildly volatile markets can magnify the impact of making a wrong decision just as the market is about to move in an unexpected direction, either up or down. Taking gradual steps is one way to spread your risk over time as well as over a variety of asset classes.
Content Prepared by Forefield Inc.
