Some of the comments;
- It seems all you "advisors" have this basic assumption that a "financial portfolio" is needed?
- The "stock market" is a fools game created to steal your money.
- Top down may have worked this time, but has it always?
- Most of these blogs remind me of a daily racing form you get at the horse track... It is gambling!
Wow that is some dourness and I probably resemble some of those remarks (blogger and advisor). First off, after months and months of stock market declines it makes sense to expect that many people will be emotionally weary. Comments like the ones above belie that weariness. The folks leaving those comments might be inclined to tell me to hit the bricks but but for anyone not inclined to compare stock market content to a racing form they might benefit from recognizing the emotion exhibited by other people which in turn might prevent them from letting their own emotions get the best of them.
I was having a conversation with someone on Wednesday and I said the biggest threats to a successful financial plan are poor decisions and poor performance (it only takes one of those to derail a financial plan). People have more control over their decisions than their portfolio results. One source of poor decisions is letting emotion dictate portfolio action as opposed to logic. This is not to say that by remaining logical you will get every decision correct but your chances for success are better if you remain cool, calm and collected.
I've talked about the way I deal with market declines and emotion before but it could be useful now and has helped me along the way. I try to make this as simple as I can. The stock market goes up most of the time but occasionally it goes down and a little less frequently it goes down a lot. These are immutable laws of stock markets. There is no changing this. It will be the case for as long as you invest.
Knowing this ahead of time should make the task of enduring easier. If you look back at blog posts from a couple of years ago, even earlier, I talked about the next bear market and the one after that in very routine fashion as a way of trying to express how matter of fact they are. The current one will end then there will be a bull market again followed by another bear.
To the comment pasted above about top down, the market has tended to warn when the bear phase is starting in fairly consistent ways. Part of that has been that relatively close to peak the market crosses below its 200 DMA. If the goal is to miss a lot of most of the pain of a typical bear market as opposed to trying to get out at the top then a top down exit strategy can be very effective.