Frank Sinatra and Your Portfolio

Frank Sinatra’s music captivates listeners, weaving tales and transporting them on a voyage through life. It Was a Very Good Year is one of his most popular songs, looking back on different parts of life and remembering the good times and milestones.

Now how does this apply to managing a portfolio or investing?

The Market’s Ups and Downs

Analogous to the way Sinatra portrays his life stages, we find investment portfolios show both positive and negative financial performance cycles. Strong performance becomes achievable through an appropriate combination of investment strategies and market conditions. 

Timing the Market: A Lost Cause

A famous analogy from George Goodman’s Super Money (written under the pen name Adam Smith) is that investing is like a party. As the champagne flutes float and the laughter echoes, you know this is a wonderful party. The hardest part is figuring out when to leave. Timing the perfect exit becomes harder when the clock in the room has no hands.

Market timing is relevant here. No one can figure out when the market will go up or down. Investors should focus on risk management and portfolio adjustments that align with long-term goals rather than trying to time the market.

A Strategic Approach to Portfolio Management

You must establish a plan to operate within the market regardless of good times or bad.

• Rebalancing a portfolio on a regular basis more effectively reduces risk exposure.
  
• Strategic profit-taking stands as a tool to save you from dangerous market positions so you remain guarded from excessive market risk.
  
• Taking precautions to protect your portfolio begins with the barbell approach, which ensures that you maintain a balanced portfolio across a variety of asset classes in order to protect your investments from the effects of market volatility.

The Secret to Sustainable Success

Investors should exercise self-control and seek long-term stability rather than attempting to forecast the unpredictable. Despite market volatility, you can have many “very good years” by managing risk, rotating assets, and making informed decisions.

For more insights on building a resilient portfolio, visit Watchdog on Wall Street.