What Should I Do About the Debt Ceiling Crisis?
July 30, 2011- On the eve of a weekend of continuous news coverage about the debt ceiling drama and the economic calamity being forecast by every talking head on every news channel, please allow me to offer a few thoughts.
I have no idea what will happen in the coming days in Washington. I have no idea what would or could happen if this “crisis” is not resolved by next Tuesday. I also have no idea what affect all of this will have on investment portfolios on Wednesday regardless of the outcome. What I believe is that, judging by the numbers, the capital markets have largely ignored this staring contest (the volatility we have seen this week is what we might see in any given week). I believe the only certainty in investing is uncertainty.
If you have an investment plan and avoid the temptation to change your plan in anticipation of what might happen (or what someone says will happen), I believe you will, over time, increase your long-term returns. If you time the markets by anticipating what might happen, I believe that history and academics teach us this will reduce your long-term returns.
The plan we have for our clients is to stay true to their chosen asset allocation and avoid relying on anyone’s forecast. The chosen allocation is developed as part of a well thought out financial plan and takes into account the certainty of future uncertainty. What this means is that if a portion of the capital markets collapses next week (U.S. stocks, for example), the decrease will give us an opportunity to buy. And if an asset class goes up as a result, this will give us an opportunity to sell.
If you are troubled about how the events in the coming days might affect your investments, it may mean you don’t have confidence in your investment plan. This political/economic drama is a reminder to make sure you have a strategy in which you can be confident, knowing that the next crisis will certainly come along.
If you would like an independent review of your investment plan, we will be happy to provide an initial consultation/second opinion at no charge.
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Information presented is for educational purposes only and is not personalized investment, financial, legal, tax, or accounting advice. Nothing on this website should be interpreted to state or imply that past performance is an indication of future performance. All investments involve risk and unless otherwise stated are not guaranteed. Be sure to consult with tax, legal, accounting, and financial professionals about your specific situation before implementing any planning strategies. Investment Advisory Services offered through Timberchase Financial, LLC, a Registered Investment Adviser with the U.S. Securities & Exchange Commission. Registration does not imply a certain level of skill or training.