How do you say “Brexit” in Italian?? My best shot is: Brexissimo.
Not that it matters, because it didn’t happen. What is it? This week saw yet another “threat” to the global markets …. that was over in almost less than one day.
The one-day market weakness was caused by skepticism by European citizens — this time in Italy — of the European Union (the EU) and the common currency, the euro, possibly leading to a future Italian exit from the EU. The Eurosceptics kicked off enough turmoil to lead markets to be down globally on Tuesday. But the turmoil was short-lived for the most part — this time.
Here is the point — and this may bore the heck out of you: when uncertainty and volatility tremble your portfolio, it helps to have a pre-determined plan that is based on asset allocation. “How did we jump from Brexissimo to Asset Allocation?” you may ask.
It is no fun to watch your portfolio go down. BUT- there are instances when down markets are part of the plan. For example, when you have added new monies to a portfolio or made portfolio changes that led to a large amount of cash awaiting investment. Then down markets are your friend, because putting money to work in a portfolio (otherwise known as buying) is slightly more “fun” when you buy at cheaper prices. Or, down markets are part of the plan when you have been taught to anticipate that markets WILL go down and you are prepared not to let that occurrence deter you from your overall, longer-term plan. These instances are examples of attention to asset allocation. Plain and simple.
All of this talk is nothing new to my clients, friends and regular readers. But to those of you wondering how Brexissimo is going to affect your investments, it is useless to think about after the fact. All of the “smart stuff”, as in advice from a professional financial adviser who is acting in your best interests, takes place far, far in advance of volatility the likes of which we saw in this Holiday-shortened week.
Brexissimo (Italian exit) or Frexit (France) or Turxit (Turkey) and more will lurk for months and years to come. A well-designed portfolio can be made to withstand these events and the emotions that accompany the volatility surrounding the events. The goal is for the events not to matter to you in the big scope of things. Because you are getting effective financial advice for you and the people about whom you care the most. That is what I am here for — to talk with you and advise you what your asset allocation needs to be before the next Brexissimo.
How about a San Pellegrino, anyone?