3 ms·
I don't agree. There are three things that normal investors should be doing right now: 1 - Assess how you feel. Are you upset by the loss of value? Then you ma
by dcftoapv 7y ago
I don't agree. There are three things that normal investors should be doing right now:
1 - Assess how you feel. Are you upset by the loss of value? Then you make be more risk averse than you thought. It might be wise to reconsider your asset allocation after this emergency is over. However, it's not wise to redo your allocation while the VIX is above 20ish.
2 - Check in with a financial adviser. This is a good reminder that your financial portfolio matters, and it is smart to use this as a prompt to check in on your financial health.
3 - This is the most important one, but you can't do it if you're not good on #1 and #2. REBALANCE YOUR PORTFOLIO. If you are allocated to risky and riskless assets then it is time to make sure that your allocation is still where you want it to be. It probably isn't. If your allocation to riskless assets is higher than you normally would like then you should sell riskless and buy risky.
Why is #3 so important? Because it allows you to collect a liquidity provider premium. Purchasing risky assets in volatile markets a) stabilizes the markets b) takes the advantaged side of the transaction. A lot of research stands behind this idea. Rebalancing in volatile environments is an easy and reliable way to outperform your peers over the long run.