We hear about the importance of balance in all aspects of our lives. Whether it's your priorities, your diet or your checkbook – the concept of balance is a key to long-term success. And, when it comes to investing, the practice of balance should be top-of-mind as you look to stay on track with your overall strategy.
How does balance affect your investing decisions today, and down the road? Let's take a look back before we look forward.
Stocks reached record highs early in 2017, driven by rising optimism around the prospects for economic and earnings growth. And using the S&P 500 as a gauge, this is now the third-strongest bull market in the past century, with the market more than tripling since the financial crisis in late 2007.1 Looking back, certain events have caused unattended portfolios to be pushed out of alignment, such as the tech bubble in 2001 and the sharp drops from the financial crisis seven years later, the bull market that began in 2009 and the strong short-term rally after last year's presidential election. When portfolios become unbalanced, they can react differently than originally intended.
So what does this mean for investors today? As we look ahead, we think a focus on diversification and an active approach to rebalancing will put portfolios in a better position to stay on track as investment conditions shift. Consider the following perspectives and recommendations to help ensure your portfolio stays aligned with your goals, not simply recent performance.
U.S. large-caps have led Canadian and overseas stocks. And, based on sectors in the TSX, financial services and industrial sectors have performed best over the past year, while the consumer staples and communication services sectors have lagged. These differences can create imbalances that can also affect your portfolio’s performance over time. As the bull market continues, we think asset class and sector leadership will rotate.
As you navigate the inevitable ups and downs of the market, be sure to maintain balance with your investing strategy. A portfolio review with your Edward Jones advisor can help you evaluate your risk, ensure your investments are aligned with your long-term goals or identify gaps and imbalances in your portfolio.
Past performance is not a guarantee of how the market will perform in the future.
This information is for educational and illustrative purposes only and should not be interpreted as specific investment advice. Investors should make investment decisions based on their unique investment objectives and financial situation.
1 Morningstar Direct, 2/28/2017
2 Morningstar Direct. U.S. stocks (50%) represented by the S&P 500 Index. Canadian Stocks (50%) represented by the S&P/TSX Composite. Bonds represented by the FTSE TMX Canada Bond Universe.
Here are some common emotional investing behaviors that may derail your journey to reaching your long-term goals.Read more
Most investors make their money over time…not overnight. These "rules of the road" summarize our time-tested investment philosophy.Read more