The Prudent Investor Blog

Lessons from Sandy for the Prudent Investor

Posted by Joe Young on Wed, Nov 21, 2012 @ 03:22 PM

prudent investorHurricane Sandy is a disaster. On that, there is no debate. Each of us is either in the thick of it ourselves or have close family and friends who are. All of us face a swarm of questions in the weeks and months ahead: Could we have been better prepared? Is it global warming or the way the world turns? How (and with what funding) will we rebuild our communities, our families … ourselves? What comes next?

If we can offer comfort at this time, it might be a brief reminder that there is at least one big, burdensome question from which we have released you: You need NOT wonder what trades you should be making in your portfolio in reaction to Sandy.

As you know from our ongoing conversations, your portfolio should already be positioned to capture the overall expected growth in our markets. It’s also already diversified to dampen as much risk as possible from news like Sandy. Any changes to your holdings should be based on your personal goals and risk tolerances, not in reaction to current events. Hurricane Sandy, as awful as it is, is no exception to these rules guiding your disciplined investment strategy.  This is how a prudent investor invests.

Talking about a moving target anyway! We’re drafting this communication hours after the New York Stock Exchange reopened (not to mention shortly following Apple’s abrupt change-in-leadership bomb). At a glance, the market’s visual chart looks like the downhill slope of Mount Everest, with dripping red numbers. To venture out in these sorts of conditions would seem ill-advised to say the least, whether discussing the weather or the markets.

That’s not to say many investors won’t try anyway. Even the venerable Wall Street Journal is sporting a live blog of the market opening, “keeping you abreast of which stocks are bouncing, which ones are falling and how the whole operation goes off.” The blog included a 6:10 a.m. call to action: “Bring on the car pools, crank up those generators and let’s get trading!”

We can’t help but love the indomitable spirit of New York and the US in general … but seriously? Let’s not “get trading.” Not unless your personal goals or risk tolerances have changed. If that is the case (and it may well be if you suffered significant damages from the event), please contact us at your earliest convenience so we can discuss a sensible revised wealth plan for moving forward. Either way, if we’ve not already done so, we will be reaching out to you in the near future, to learn how you are doing and how we can help.

Excerpt from "Mid Quarter Investor Letter, October 31, 2012" by Wendy Cook Communications

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