March 25, 2010
During the financial crisis and impending bear market, the carnage was everywhere affecting both good and bad investments. With respect to the good investments that went down, there were many relevant clich?s being tossed around: The baby was thrown out with the bathwater; don't switch horses mid-stream, etc. With hindsight we have the benefit of seeing that much of that oft-expressed wisdom was right on.
The recovery that is now just over a year old has seen a sharp recovery of many good investments. Though most of these investments are not back to their peaks, they are far above their lows. An analogy might now be that we have brought the baby back indoors, or rather that we have made it across the stream. Thus it could be a good time for investors to consider switching horses for several reasons. The first is behavioral. After going through such a difficult experience we may know ourselves a little better than we did before. If we made it through the crisis without panicking then our asset levels have likely made a modest recovery. Our appetites for risky assets may not have followed. Becoming incrementally more conservative now seems like a good tactical move. The second reason now could be a good time to consider switching horses (or changing some investments) is that the opportunities available in the market today are different than they were before this whole morass began. We are at a different stage of the business cycle. The relative attractiveness of investments is therefore different as well. It's a good time to call your financial advisor to find out if you are well positioned for what lies ahead, rather than what lies behind.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).