With 2019 having come to an end, investors looking at how to engage in portfolio re-balancing for the New Year have a lot to consider. With most investors in a rather bearish mindset heading into 2019, the surprise rally of approximately 30% in North America over the past year in equities means those who waited on the sidelines did get dinged quite badly.
While heading to the money markets hurt most investors the most, investing in defensive equities and bonds actually proved to be strong investments as well, with the overall U.S. bond market posting gains near double-digits, on average.
In that sense, this past year has been a lesson to all investors that staying invested, even in times when sentiment becomes bearish, is important for long term gains. For those who are nearing retirement or in retirement, I would suggest listening to many of the market leaders in cutting back on risky equities (those which have high cyclicality and are prone to large drops in recessions) and instead take a more defensive stance, focusing primarily on equities that can provide income, and hopefully dividend growth, over time.
For young investors, continuing to stay invested and keep the core base of one's portfolio (the buy-and-hold piece) untouched, is one of the best ways to ensure long term success with one's strategy.
Should a recession hit, and the core stocks in one's portfolio take a hit, use some of the excess cash you may have been building up in your portfolio from dividends to double down on these great companies and buy them when they are cheap.
Invest wisely, my friends.
