How do you know if your Fortune Cookie is Right?

The financial pundits are out with their forecasts for 2015…well some of them, anyway. The one who told us that Bear Stearns was in good shape as it was closing its doors in 2008 says 2015 will be a good year due to cheaper oil, low interest rates, higher consumer confidence… The one who departed the mutual fund company he helped start to join another mutual fund house forecasts: “The good times are over.” While others like George Soros, Warren Buffet and John Paulson have shared their views in shareholder letters and various writings, these gentleman have not put their voice to a megaphone in forecasting calamity or good times ahead for the market in 2015.

In the 20 years I was an advisor in the financial planning world, predictions were constantly made and few of the loud ones came to pass on the timetable they were predicted. But who cares, right? Or perhaps, who remembers, right? After all yesterday’s hysteria or mania means nothing in the wake of today’s screams of the present jubilation or catastrophe.

So, how can you know if your fortune cookie is right as it tells you of gloom or joy ahead? And what if your cookie says the opposite to mine and we are invested in the same funds and stocks? I say the focus is on the wrong thing.

At all times, your financial portfolio should be nimble enough that it can weather many, not most, but many storms. How can you do this? Contact your financial advisor and have a conversation with them about the amount of risk you are willing to take before your definitions of financial “storms” blow in.

I am not an absolute fan of buy and hold INDEFINTIELY for a few reasons. The financial world is not a solid one. It reacts to certain conditions with differing velocity. The funds have restrictions on what they can and cannot do with the amount of cash they can have in addition to where and how they trade. Find out how the funds you are invested in match with your principles on investing and limits to risk.  Ask you advisor what their philosophy on managing your portfolio. Does it match you philosophy on investing?

What happened in 1987, 2000, 2008, to name recent years, can certainly happen again. If you were caught off guard then, do not get caught off guard again.

If you suffered memorable losses in 2000 or 2008 and think this could happen again, do not play the same game you played then.  This time you might put limits to your losses. You might view cash as a temporary investment to weather out financial storms. You might stay fully invested in the financial storm.  Take an active role in your finances. It would be a smart move on your part.

When I think of repeating the same mistake again because I didn’t do anything different the second time, I am reminded of a story from Portia Nelson’s poem ‘Autobiography in Five Short Chapters:

“I walk, down the street. There is a deep hole in the sidewalk. I fall in. I am lost…I am helpless. It isn’t my fault. It takes forever to find a way out. I walk down the same street. There is a deep hole in the sidewalk. I pretend I don’t see it. I fall in again. I can’t believe I am in the same place. But, it isn’t my fault. It still takes a long time to get out. I walk down the same street. There is a deep hole in the sidewalk. I see it is there. I still fall in…it’s a habit. My eyes are open. I know where I am. It is my fault. I get out immediately. I walk down the same street. There is a deep hole in the sidewalk. I walk around it. I walk down another street.’”

When have you experienced your own financial turbulence? How did you deal with it? How would you deal with it if it happened again? Leave a comment. I would love to hear from you.

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