Check Your Portfolio Allocations: These Two Steps Will Help You Manage Fear

By Vic Lederman, analyst,  True Wealth


Panic.

Sell everything.

Then move all of your cash to gold… if you didn’t spend it all on face masks and duct tape.

Am I serious? No. But there’s no question, investors are darn scared right now.

Volatility is back, and the fears driving today’s market action are scarier than ever. My guess is, you’ve felt at least some of the pressure.

That’s OK. It’s normal to feel like you must act when the market gets choppy.

But I promise you… following the above recipe is a path to ruin. You can’t live your financial life from one panic to the next.

Imagine living a life ruled by your fears… Where would you be now?

My grandmother, bless her heart, gave up driving in her 50s. She was afraid of making left turns. Really.

Did it make her life harder? Absolutely. But that’s just one, albeit lighthearted, example of letting your fears manage your life.

In our financial lives, we can do better. We have to.

You can’t go acting erratically just because you’re afraid. If you do, you’ll end up selling at market bottoms… and buying at the tops, when it “feels” safe.

“But Vic, I have to do something. It feels like the world is falling apart. You can’t really expect me to just sit and watch?”

No, I don’t.

Today, we’re going to go over a few of the things you can do when fear takes hold. They might just save your portfolio from the abyss.


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So… you feel like the world is falling apart? You’re tempted to panic out of the market?

Instead of doing that, let’s use this opportunity. Now is the perfect time to practice putting our minds at ease.

First, check your portfolio allocations. Are you overexposed to any one position?

This one keeps investors up at night for sure. It’s a recipe for anxiety.

If you have too much money at risk on a single position, you probably already know it. It’s likely eating away at you. And my guess is, you’re just hoping things will go your way… and losing a lot of sleep.

This is an easy problem to solve. Trim your overextended positions back and make sure you’re not taking more risk than you can afford. If you do that, you won’t feel the need to panic out of your investments.

Of course, there’s an even more important tool you should be using… You must know and follow your exit strategies.

Getting out when you feel like it simply isn’t good enough. Unless you’re a computer, your emotions will persuade you to make poor decisions.

So, for every position you have open, you need an exit strategy. You need to have it written down. And you need to follow it.

Personally, I like trailing stops. They’re one of the best return-maximizing tools available to mom-and-pop investors. This just means if a stock falls a certain percentage from its highs, that’s when you’ll sell… No questions asked.

You can learn more about trailing stops right here. But if trailing stops aren’t for you, that’s OK. Find what works best for you and stick with it. The key is that you must have an exit strategy – and follow it.

Set your own rules… Let them be your rock. They can have an incredibly stabilizing effect.

Now, with your investing house in order, you’re prepared to ride out any volatility the market might throw at you. You’ll make smart decisions, not rash ones. And your portfolio will be geared for long-term success.

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