To The Moon

$Visa(V)$

$NVIDIA Corp(NVDA)$

$Apple(AAPL)$

In my article earlier on the Top 3 Blue Chip Stocks Apple (AAPL), NVidia (NVDA) and Visa (V) you realise that a long term stock market plan is always better than a short term one.

Since the beginning of 2022, markets have been in turmoil. Inflation fears, the invasion of Ukraine by Russia and recent Covid shutdowns have created tremendous uncertainty regarding the economic outlook in the U.S. and abroad. Markets rarely respond well to uncertainty and that has played out thus far. Unlike typical stock market corrections, the bond market has also been in decline. For the first time in decades, both the stock and bond prices are declining simultaneously, leaving investors searching for answers. What is an investor to do?

I believe the key word in the question is “investor.” True investors have well-thought-out goals with a plan focused on achieving their desired results. Equity investors invest in high-quality companies as shareholders, hoping to financially participate in the company’s profitability and growth over time. Traders, however, focus on the short term and welcome market volatility. Because of their short-term focus, traders must be correct in their decisions with much greater frequency and urgency than long-term investors — quite a challenge for the average retail investor. As a CNBC guest recently remarked, “I know a lot of wealthy investors, but very few wealthy traders.”

Even long-term investors experience distress during times of market decline and volatility. The difference is that investors tend to have an underlying financial plan to fall back on for comfort and support. If properly developed, their plan would have identified various risks that threaten the success of the plan and shared effective ways to mitigate the risk. Risks include premature death of the individual or a spouse, disability, significant health event, job loss and yes, even market volatility. No plan can consider every variable, but having a strong framework on which to base your decision-making is critical to success of your financial plan.

It is very difficult to get somewhere if you don’t know where you are going. In the days before GPS, when you made a wrong turn or were faced with a detour, you were forced to pull off the road and regroup. If you were lucky enough to have a map (and one for the right state), you had to try to get back on track with a car full of “navigators” providing their input as cars whizzed by. Making decisions on the fly under distress can lead to less than desirable results.

Choose or affirm your portfolio’s asset allocation.

With a financial plan in place, you should be able to quantify the level of return you need from your investments to reach your goals. For some who are behind the curve, the return needed may be unrealistic. In these cases, other factors must be assessed. Your revised plan may require you to work longer, save more or spend less. For others, the level of return needed for success may be lower than currently invested. Your capacity to take risk may differ greatly from your need to take risk. Understanding what asset allocation is right for you and how it fits into your greater plan can provide great comfort during times of market instability.

Revisit your portfolio composition.

Now that your target asset allocation is set, does your portfolio reflect it — and is it designed to weather the markets? The most common way to reduce risk is through diversification. Do you have the appropriate types and levels of diversification?

Does your equity allocation consider large-cap, mid-cap and small-cap domestic stocks? Does it diversify geographically and include stocks from developed and emerging markets? Does it include both value-oriented and growth-oriented holdings? Do you have concentrated positions that tie your portfolio’s performance to a single or a small number of holdings?

Does your fixed income allocation consider different types of bonds (government, corporate, municipals, etc.) as well as maturity, geography and credit rating? Finding the right mix is critical to building a resilient investment portfolio.

It is safe to say that market volatility is no fun for investors and advisors alike. When markets decline, human nature pushes us towards taking quick action to stop the pain.

History has shown us that this approach has not worked well and that markets repeatedly adjust over time and grind higher.