Personal Investor: Meltdown memories are fading
Investors are probably more likely to remember the 2008 movie “The Curious Case of Benjamin Button” than the 2008 global financial meltdown.
In the film, a man ages backwards. In the meltdown, global equities shrink to less than half their value in a matter of months.
Stocks have more than tripled since the 2009 low, but a new survey from Wells Fargo/Gallup finds only 54 per cent of Americans expect another meltdown – down from 58 per cent in 2014 and 62 per cent in 2013.
In the same poll, only 18 per cent said they're selling stocks to cushion their portfolios from another selloff, and only one out of five said they were buying bonds to limit their exposure to the stock market.
For most money managers, the meltdown can be hard to forget. Here a are a few tips to be sure you’re ready for a repeat performance:
- Check multiples: The value of a stock is based on the market perception of the company’s earnings potential. Check the price-to-earnings ratio to see if your high flyers are flying too high.
- Rebalance: If those same high flyers are taking up a bigger portion of your portfolio, it might be a good idea to trim them
- Stay diversified: Take a step back and make sure you’re not invested too heavily in one geographic region or sector. Diversifying spreads the risk and opens up more opportunities.
If that’s still not enough trim partial positions and build up cash so you’re ready for Market Meldown II.
As for a Benjamin Button sequel, that’s out of the question. Think about it.