Markets Are Up, So Prepare For the Next Storm



My Sunday Washington Post Business Section column is out. This morning, we look at what you can do — right now — to get yourself prepared for stormy weather in the markets.

The print version had the full headline The sun is shining on portfolios, but winter is coming, while the online version was Your portfolio may be basking in the sun, but, as always, winter is coming.

The theme is simple: Markets are at record highs, things are going well. Here is what you need to do to prepare for when the next inevitable cyclical downturn occurs. I include 5 overall steps you should take to get prepared. They are:

1. Clean up your finances
2. Restructure your debt
3. Make smart decisions about your individual stocks
4. Be ready to take advantage of volatility
5. Envision your emotional state

Here’s an excerpt from the column:

“Some of the stocks you have accumulated over the years may no longer be consistent with your risk tolerance or long-term goals. Decide on what individual holdings no longer make sense to hold, especially now with volatility low and prices high.

Are you willing to hold names that have the potential for increased volatility and big drawdowns (and the associated stress that comes with these higher-risk holdings)? Lose the speculative junk that somehow slipped into your portfolio courtesy of your brother-in-law’s latest hot stock tip.

Some of our clients own low cost-basis stock that carries a large capital-gains tax liability. This is especially true of highly concentrated holdings of company options or inherited stock. You can create a strategy to sell tranches of appreciated stock at predetermined prices and simultaneously offset the capital gains taxes through tax-loss harvesting.”

Be pro-active now that the sun is shining; Don’t give yourself something to regret in years hence . . .



Your portfolio may be basking in the sun, but, as always, winter is coming
Barry Ritholtz
Washington Post, June 7 2015

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  1. Iamthe50percent commented on Jun 7

    Thank you. I did this last Christmas in anticipation of my retirement early this year. My only question is regarding the small caps (Mutual Funds and ETF’s only) that I hold for long term (multi-decade) gain. The large caps are all dividend payers and I intend to hold through Hell and high water for income or at least until bonds return more than a pittance. My current thinking is to hold those small caps for the long term and not try to time them. Especially the ETF’s like VXF and VO. If these wind up with a ten tear losing streak, the country will be in dire straits indeed. Or should I follow my risk tolerance and dump them when they cross 20% down? However, the last two crashes show that I delay too long getting back in and I would have been better off just sitting tight.

    The last crash, I was far too heavy in one speculative class (Russia and east Europe). This time I’m more broad based. I learned.

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