Finance Expect the unexpected. As wisdom goes, it’s hard to get much better (or more insightful) than this. Particularly when it comes to managing your portfolio. Here’s the thing: when it comes to investing, nobody has a crystal ball – not you, not me, not your financial advisor, not the experts on TV and not that friend who’s always passing on “hot tips.” And, while the best economists and money managers in the world spend a lot of time trying to analyze economic data and predict market movements, the fact is that no one can consistently do it with 100% accuracy. What we can do, however, is ask “what if?” That is, we can try to imagine scenarios which show howwell (or not) our portfolios might performduring an adverse financial or life event. No, asking questions won’t prevent adverse events from affecting your portfolio. But it can make you more aware of some of the risks which your portfolio faces, and can help you determine a course of protective action. Right now seems like a particularly good time for such questions. Over the past several months, stock markets have continued to move ever higher, to the point at which even the most optimistic of analysts admit that they are looking “frothy.” Rather than be complacent and assume that the good times will last forever, it makes sense to ask “what if?” now, before any economic threats and/or life risks actually occur. The following isn’t an exhaustive list of all the possible risks and stresses which your portfolio may be facing, but it should give you a good idea of the events that professionals consider when managing portfolios. How to ask “what if?” with your portfolio Asking tough questions to ensure that your portfolio survives a variety of market and life risks By James Dolan 30 | www.snowbirds.org
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