Many investors turn to professionals to help them improve their portfolio performance. What I always find amazing is when these investors then call us and ask us to “take them to cash” because they are fearful about what is going to happen in the market. Why have you hired a professional investment firm, who spends countless hours researching the markets, who spends significant money on unbiased research, and who has a track record of navigating difficult markets, if you are going to make extreme decisions and remove their discretion on how to best manage your investments? It makes no sense to me. We are dealing with completely
unchartered waters.
No one… And I mean no one who is alive today has ever managed money through a worldwide pandemic. 2021 was a reasonably calm year, with only one 5% correction during the year. 2022 is set up to be a successful year, but it wouldn’t surprise me to see it be a bit more bumpy along the way. Please don’t self-sabotage yourself by making rash decisions. We are better equipped to make these tough decisions for you and have a track record of making very wise decisions for our clients. Polaris Wealth is a tactical manager. We will get defensive with your portfolio if or when our clinical research deems it appropriate.
We would encourage you to meet with your financial adviser at Polaris Wealth to discuss your current asset allocation. Depending on your risk tolerance (and stomach) we would encourage you to lower your bond exposure or even temporarily eliminate it given the current inflationary environment we are currently in starting the year. Bonds will most likely show a negative return in 2022. It’s hard to imagine them being able to fight off tapering and the upcoming Fed action. And the best way to combat inflation is to grow your portfolio. Work with your financial advisor and reconsider your overall exposure to stocks versus bonds. Look at how much of your portfolio is positioned in growth stocks versus value stocks.
We would also encourage you to limit your cash exposure. I hear from clients all the time that they are keeping cash on hand to invest when the markets pull back. Please ask yourself this question, what did you do the last time the market pulled back? Did you invest that cash or were you too nervous to invest it? Most investors freeze when put to the test. Sitting on significant cash can materially impact your financial future. You are guaranteeing yourself the loss of future buying power. Cash is earning you nothing and CPI inflation is at 6.8%. Are you willing to lose almost 7% of your buying power over the next year, or should you invest that money and try to offset inflation?