David Fabian: It seems as though more recently, the 6-month consolidation cycle in the SPDR S&P 500 ETF (SPY) alongside the concomitant volatility in fixed-income, is creating a layer of anxiety rather than ease.
The feeling of nervousness as I speak with individual investors stems from the fact that growth is slowing and gains seem harder to come by.
This creates the lurking sensation that there is a problem that needs to be fixed through action.
Let me guess – if you’ve been managing a relatively balanced portfolio that has gained less than 2% over the last six months, you’re probably thinking that it’s time to make a change.
Maybe we sell all the bonds, buy more growth stocks, get some China A-shares in here and really see if we can get this thing moving again.
That will solve all your problems. For about 5 minutes.
Drastic changes of that sort are going to alleviate the immediate feelings of anxiety and give you a sense of purpose after months of inaction.
However, it will also grossly skew your overall asset allocation towards a risk profile that may be far outside the bounds of your comfort zone.
Always remember that chasing short-term performance in individual hot spots can be fraught with risk.
As an example, the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEARCA:ASHR) has gained 143% over the last year.
Great place to be if were early to the party.
However, at this stage of the game, ASHR could easily lose 20% of its value and still be considered in an uptrend.
As a disciplined investor, one of the hardest things to learn is patience.
You don’t always have to be doing something all the time in order to be actively participating in the market.
Sometimes it’s better to grind your way through the boring periods by revisiting your investment plan.