The pain doesn’t seem to go away. The world is still at a precipice. Inflation is a monster now with food prices going up XX. Loan rates are increasing faster than fixed deposit rates.
The Pain. Now, as an investor, remember, the markets want you to experience this pain. In fact, they want you to get used to it.
If you can’t live through the struggle, you will not get the benefits at the end of it. If you abandon because of the ‘pain’, you can let go of the gains too.
Then there is the mind that continues to trick us. You might think that it is better to get out now and re enter at a ‘lower level’ or ‘after the correction is over’. The problem is that level or moment will be long gone before you decide to take action.
So, how do you handle this tricky situation?
In all my years of practice, I have come to rely on one way – Asset Allocation.
It is the way that allows you to make “average decisions” in the face of “uncertainty”. Yes, it sounds dull and boring but this is what will let you survive, stay in the game so that you can reap the benefits when they come.
It is not perfect, but it works. It is also simple to put into practice.
As of July 1, 2022, the Unovest Asset Allocation Update / market indicator looks like this. Here’s the link to the webpage.
As you can see, we are still not out of the woods. The markets are still giving mixed signals. The PE ratios are at their rolling lows and 10 year G-Sec yields at their highs.
We continue to be cautious. Someone who has 5 years or more can allocate half to equities in a systematic way. Don't get too adventurous.
Someone who is certain to buy a house next year is better off saving all surplus in safe investments and not get carried away with the "market lows" can lead to "higher gains" in 12 months. Markets can be ruthless.