A. Many investors are concerned that the 7-year old bull market is fragile right now, anything goes wrong the market could turn south, for example -
- An ill-timed interest rate decision by the Fed
- Wrong headed policies by a newly elected U.S. president
- A spike in oil price
- Turmoil in Europe as the Brexit moves along
- Hard landing in Chinese economy
- ...
- Or simply the stock prices just outpaced the corporate earnings
The truth is, no one knows if any of them will happen, but it's a fact that stock markets are cyclical, so don't blame yourself if you are thinking about defense.
While the best long term investment strategy is to stick to your original plan, use dollar cost average when the market is down and rebalance, if you want to use portion of your portfolio to play defense, it is completely acceptable and we will discuss some strategies in next blogpost.