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Be prepared for a bumpy ride on the road to investing success

It’s summertime in Michigan and people are hitting the highways.

By now, Michiganders are aware that orange is the official color of summer as evidenced by our construction barrels.  

Have you ever noticed what often happens when you’re cruising down the freeway and you see a CONSTRUCTION 2 MILES AHEAD sign?

Drivers speed up, jockeying for position ahead of slower moving vehicles. Then they suddenly stop and you have to slam on the brakes.  It’s crazy and dangerous. Good thing you’re wearing a seat belt.

Our Federal Reserve is the entity entrusted to keep our economy moving forward and getting people into the job market.  It’s been in the spotlight lately, primarily because so many are concerned that we may be entering an inflationary cycle.  Without getting too technical, the Fed’s monetary policies analyze existing technical economic data to determine a course of action.

Many people, including me, believe the Fed needs to be more forward looking and anticipate what’s on the road ahead.  Could you imagine what our construction zones would look like if there weren’t any signs warning us of construction ahead?

What I don’t want to see is everyone thinking that the economy is running at optimum speed and then, without warning, it slams on the brakes.

As a steward of my client’s nest eggs, I’ve been a worrier throughout my career.  When the economy is struggling and investments are foundering, I worry. When will the economy and investments get back on track?

But I also worry when things are going well.  When are the good times going to end?  Will it be gradual or sudden? A smooth deceleration or a sudden and painful stop?

The reality is that no one knows what will trigger the next financial pullback.  Nor do we have any idea when it will occur.  However, I will say that coming out of the Covid-19 shutdown has put us in an unusual situation that has many experts baffled.

I consider the current air of uncertainty to be somewhat concerning. That’s why I believe right now is an appropriate time to make certain your finances are in good order.  If the economy does receive a sudden jolt, you should be financially prepared.

That means having an adequate emergency cash reserve.  Even in this low interest rate environment, with bank interest earning just pennies, it’s important to have money readily available in the bank.

With low interest rates it’s easy to rationalize borrowing too much money, especially if it’s for that dream house. But I strongly caution against overextending yourself by taking on an inordinate amount of debt.

As for your investments, make certain you’re diversified among various asset classes.  That includes stocks, bonds, real estate and other alternative investments, such as precious metals.

Even if you just own stocks, diversification is still important. Fortunately, there are thousands of stocks from which to choose.  Tens of thousands if you think globally, and I think you should.  There are a number of quality investments available outside of the U.S.

Over the years I have guided my clients through numerous ups and downs. At some point, we will hit a speed bump or worse. I’m confident that if you prepare properly and anticipate rough patches you will emerge relatively bump free.

Know Someone?

Do you know someone who would like to meet with a financial advisor?

Ken Morris 248.952.1744

E-mail your questions to kenmorris@lifetimeplanning.com 

Ken is a registered representative of LPL Financial. Securities and financial planning offered through LPL, a Registered Investment Advisor, member FINRA/SIPC. Ken is Vice-President of the Society for Lifetime Planning in Troy. All opinions expressed are those of Ken Morris. LPL and Society for Lifetime Planning are independent companies. Investing involves risk including loss of principal. No strategy assures success or protects against loss.