Changing your investment mix can backfire. As the illustration below shows, the investor who moved a $100,000 portfolio to cash when the stock market bottomed in 2009 ended up with just $72,000 after the recovery, as of December 30, 2016. The investor who moved to an all-bond position had only $98,000. But the investor who stuck to a 50% stock/50% bond plan wound up with $171,000, more than double the all-cash investor.
THE BOTTOM LINE…
Emotions and investing can be a losing combination. Don’t abandon your investment mix just because the market is uncertain.
Source: FactSet. Notes: The 50% stock/50% bond portfolio is represented by the Standard & Poor’s 500 Index and the Bloomberg Barclays U.S. Aggregate Bond Index (rebalanced monthly). The 100% bond portfolio is represented by the Bloomberg Barclays U.S. Aggregate Bond Index. The 100% cash portfolio is represented by 3-month Treasury bills. This is a hypothetical illustration. Disclaimers: The final account balance does not reflect any taxes or penalties that may be due upon distribution; withdrawals from a traditional IRA before age 59½ are subject to a 10% federal penalty tax unless an exception applies; past performance is no guarantee of future returns; the performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index; all investments are subject to risk, including the possible loss of the money you invest.
