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Time to Shrug

Dennis Friedman  |  March 6, 2020

WHAT I FIND surprising about the stock market isn’t its recent dramatic pullback, but how I’ve reacted. I simply haven’t paid much attention. It’s just been business as usual. I haven’t even looked at my portfolio or watched CNBC.

Such a calm demeanor is unusual for me. A few years ago, if I experienced this type of market decline, I would have made big changes to my portfolio. Yet this time around, I just shrugged my shoulders.

What’s changed in my financial life to cause this indifference to the stock market’s selloff? I credit three things:

1. Asset allocation. I now have a mix of stocks, bonds and cash investments that allows me to stay the course in difficult times. Asset allocation isn’t just about your portfolio’s long-run performance. It’s also about the short term—and how you react emotionally. It’s about balancing the need to meet your goals against how much risk you can stomach.

At age 68, my portfolio consists of 35% stocks and 65% bonds. I don’t need to take more risk to meet my goal of a comfortable retirement. In fact, I reduced my exposure to stocks when I realized my portfolio had reached my magic number.

2. Financial advisor. My investment portfolio is managed by a low-cost financial advisor. At times like this, it’s comforting to know that I’m not on my own and that I have somebody I can trust looking out for me. If I were on my own, I would have felt compelled to make changes to my portfolio.

But this time around, my advisor is in charge and it’s on him to make any necessary trades. The upshot: I don’t need to pay close attention to what’s going on with the stock market and I’m not tempted to tinker, because I’m not the one managing my portfolio.

3. Low fixed expenses. I live below my means. I don’t have a mortgage, car payments, credit card debt or an expensive cable bill. Result: I know that, even in a financial emergency, I can make ends meet. I can sleep at night knowing that, whatever happens with the stock market , I’ll have a roof over my head and food on the table.

When I recall the bear markets I’ve lived through, what I think about most are not the massive declines in the market indexes, but my futile attempts to protect my investment portfolio from losses. Those ill-advised portfolio changes are what haunt me today, not the bear markets themselves.

If this market decline is the start of a new bear market , I’ve learned my lesson: I’m determined to ride this one out. So far, I haven’t even flinched. It’s business as usual for me.

Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. This is his 50th article for HumbleDollar. His previous articles include Small Is BeautifulOn My Mind and Turning the Page. Follow Dennis on Twitter @DMFrie.

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