Stress Test

Now is the time to look at what your future plans and calculate a strategy for investment success. You are where you are because of the decisions you’ve made in the past. You can decide whether you want to panic and sell into the carnage and lose a major chunk of your investment dollars or you can decide to hang on.

It’s not like we haven’t seen wealth destruction in the past. The key is to learn from it.

It is too late to say that you should have been better prepared. However, that doesn’t mean that you cannot learn from this market meltdown and get better in the future.

Portfolios must be monitored, and changes should be made when needed. You must rebalance your portfolios at least once a year, so you can buy on the dips. The buy and hold methodology is dead. Markets change and so should your investments. Set it and forget it is not good enough.

You are where you are now. So, how do you get out of this mess?

Take a look at what you own. Do the stocks you own have a high probability of success in the future? Make sure you have good quality positions. If possible, keep buying more. Get rid of bad positions if necessary and add to the good ones. In order to survive this brutality, you need to own best-of-breed stocks. You have to look at your positions and ask yourself if they are the top companies to own. It isn’t time to speculate on what companies MIGHT do well down the road.

If you own mutual funds, you have more homework to do. You’ve got to see what’s under the hood. Does the fund own quality positions? Are they buying best-of-breed?

With the major markets down 30% or more, your best strategy is to look ahead. Ask yourself if you have the kind of investments that will make money down the road. Although it should go without saying, the flight to quality is imperative now.

Of course, it always should be.

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