Everywhere you look there is trouble in the world today. The situation in Israel and Gaza has been escalating. Russia seems to be further isolating itself from the West. Fighting in Ukraine continues. What effect will this have on your portfolio?
The answer is very simple - in the long term, it should have very little effect. Most American investors should not have a large portion of their portfolios invested in either country. Our clients have a small amount (usually through either a developing markets or frontier markets fund). There is also some exposure if you own US (or other foreign) based companies that sell to Russia.
I am advising investors for the most part to stay put. Re-evaluate your risk tolerance and see if you belong investing in those markets. Make sure that you are broadly diversified throughout the world. Russian markets have already fallen. If the situation gets better, selling now could be selling at the bottom. If it gets worse, the Russian market could continue to fall. It is a known political risk. Our advice is to not make investment decisions based on what is on CNN. Decide what percentage of your portfolio should be exposed to such risky assets and adjust accordingly. Now may be a good time to rebalance to whatever that percentage is.
Regarding world markets, although these issues may make the market more volatile in the near term, it does not change our long term outlook. There is always something to worry about. These issues will be worked out, and will be replaced by new things to worry about.
I advise clients to develop a long term plan. Make adjustments when necessary, but not based on headlines. If you would like help creating a portfolio, analyzing your existing portfolio, or assessing your risk tolerance, please give us a call @ 561-223-3252.
Scott Shrader, CFP®, EA
Disclosure:
Investments are subject to market risks including the potential loss of principal invested. Asset allocation and diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses. Dow Jones Industrial Average is unmanaged and measures broad market performance. It is not possible to invest directly in an index.