Investment Fitness Checklist

Investment fitness never goes out of style
The last time I wrote about investment fitness, I suggested that the best time to put your portfolio into order and balance was during good times, because it can be difficult and expensive to accomplish during market turmoil. As it turned out, that was November 30, 2007, shortly after the Dow crested over 14,000 for the first time. The markets reversed the next day and the Great Recession arrived 10 months later.  We all know what happened next, and it wasn’t good.

I am not a seer
I don’t claim clairvoyance about 2007. I can’t reliably predict in the short term what will happen to stock prices, the economy, interest rates, the dollar, the weather, and so on. No one can. I just felt back then that it was a reasonable time to remind investors about staying financially fit. And I feel the same way now.

Easier now than later
Markets have been emphatically up for several years. I’m not suggesting economic problems lie ahead. But I do know that your investment results will likely be much better if you practice investment fitness, and do it NOW. Why now, and what’s the rush?  Because, as in 2007, it is much easier and preferrable to make investment changes in good times than in bad, and we certainly are in good investment times.

The Big 5, plus 1
Last time around I listed 5 easy steps to investment fitness.  I repeat them now, and add one more for 2014.  The 6 are:

1. Recognize and control leverage
2. Affirm your unique investment diversification
3. Index; don’t try to pick stocks or time the market
4. Simpflify, cut costs and control taxes
5. Favor liquidity
6. Do it now – inertia is your enemy

It’s that simple
There are benefits to being in investment shape. Think ahead to how smart you will feel when the next investment surprise comes – up or down – and you are ready and relaxed.  Think about how a big surprise in the news may send the average investor scrambling while you know that your portfolio will be able to withstand events and benefit from them in ways that are not obvious now.  I could go on.

We know there are market declines ahead, and recessions too. Someday. They are part of the investment ecosystem that will never go away. But they needn’t send you for a loop each time they roll around. I’ve seen investment fitness work for 30+ years and believe it is perhaps the most important investment discipline any investor can practice.  Call us if you’d like to see and hear more.

John Osbon – josbon@osboncapital.com