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Conduct a Portfolio Fire Drill

Image: Conduct a Portfolio Fire Drill
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Thursday, 03 September 2015 07:29 AM Current | Bio | Archive

Do remember fire drills?

Back in school it was often a break from a boring class or an escape from a test. I recall teachers pleading with students not to talk during the drill so as to not share answers and tips from an ongoing test. Good luck with that. Anyway I suppose they served a purpose in preparing the student body in case our all brick buildings caught fire. The drills I never understood in regards to their usefulness were the bomb drills. As if hiding under our desks would save us from a nuclear bomb.

Anyway, with all the recent volatility in the financial markets we think it might be time for all of the nervous investors out there to conduct a Portfolio Fire Drill. Much like the fire drills back in school, a Portfolio Fire Drill is simple and easy. Just remember, walk, and don’t run.

What one needs to do first is determine how much money you will need to utilize from your portfolio for the next five years. That includes housing, food and everything in between. This is obviously pertinent to retirees, individuals planning on retiring soon, people that will need to use funds to make a down payment on home, or other large expenses such as college education.

Example #1

A retiree who needs to take out $18,000 a year from his or her portfolio to live on should have $90,000 in nothing riskier than short term bonds.

Example #2

A family that will need to dip into their portfolio to pay $100,000 towards their kid’s college education within the next five years should also be in nothing riskier than short term bonds.

Example #3

A couple actively looking to purchase a home, wishing to put $60,000 down as a deposit should keep those assets in cash or money markets. You never know when you might find the house so keep the funds in cash. It will avoid transaction costs.

As for everyone else out there who has a longer time frame before they would need to access their portfolios funds…relax.

Market corrections happen, and should be looked upon as an opportunity rather than a reason to panic. If you have your financial plan done the RIGHT way, meaning a goal-centric portfolio that focuses on building wealth over the long-term you will be fine.

Don’t go making hasty changes based upon the here and now and the ramblings of pundits that you hear on television or radio. Our motto at Markowski Investments and The Watchdog on Wall Street Radio Show is, “Everything in life that has meaning value and worth involves work, time and effort.”

The people that tell you that they have some short cut, some easy way to riches, or better yet, tell you that they know what is going to happen tomorrow are charlatans.

For all the investors out there that think the world is going to end…I am here to tell you that you are RIGHT!

It is going to end.

However, it is only going to happen once, so why bother. Your efforts are about as futile as hiding under ones desk to avoid a nuclear holocaust.

At least be more creative in your investment choices. I have seen plenty of apocalyptic films and television shows, from "Mad Max" to "The Walking Dead" and the last thing the characters needed was gold or silver.

Chris Markowski has carried the titles of author, investment banker, equity analyst, and consumer advocate. He is the personality behind Watchdog on Wall Street and founder of Markowski Investments.

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ChrisMarkowski
Market corrections happen, and should be looked upon as an opportunity rather than a reason to panic. If you have your financial plan done the RIGHT way, meaning a goal-centric portfolio that focuses on building wealth over the long-term you will be fine.
investors, portfolio, stocks, fire drill
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2015-29-03
Thursday, 03 September 2015 07:29 AM
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