Today’s Wall Street Journal provided a profile on several investors who were calling it quits, moving to cash in the face of what has been a horrific market. I know that things have been extremely tough. It hasn’t been fun.
But what interested me was the statement by one investor that he has moved from a portfolio of stocks at the beginning of the year, to all commodities in the middle of the year, to mutual funds in recent months and now all treasuries. This investor, though perhaps well intentioned, has repeatedly moved from one area that isn’t working to another that is all year long in repeated fashion. Do you see the pattern? He is now in treasuries in spite of the fact that they are yielding less than a percent. Cash in treasuries should prove to have been the new greedy investment choice in the not too distant future just as technology, housing, and oil stocks have been in recent years.
I recognize that fight or flight instincts are running in hyper drive now for many folks. You can see it in the daily quotes on my screen. But here is a question to ponder that might help you to think longer term, where you can afford to do so. What if some of our nation’s top CEO’s – those that run major corporations – were to buy and sell business divisions from their companies as fast as investors have been doing with their own portfolios recently? What if P&G in the mid 90’s had sold its diapers division to get into technology investments, then sold that to buy housing, then sold that to buy oil? Do you think the board would have a little trouble with these moves? In all likelihood, yes. Why? Because most boards know that longer term strategies should guide decisions much more than what may be the hot thing of the day.
While all areas are down right now, unless this really is the end of the world, it won’t remain that way. And if it is the end of the world, then chances are just as great that it quite simply won’t matter much anyway. Finding a plan that you can stick with for the long haul is extremely important, one that takes into consideration your tolerance for volatility. This doesn’t mean that you shouldn’t make changes, but it is often better to make them when your circumstances change rather than those around you.