Issue link: https://viewer.e-digitaledition.com/i/266572
W HILE IT IS always important to maintain a diversified portfolio, it is especially vital to remain diversified during volatile market conditions. As an investor, you should be careful not to get caught up in any panic selling. Instead, maintain your focus on long-term goals. This point is especially key if you have already built a well-diversified portfolio. Although no one can be certain about how the market will react long term, history shows that cataclysmic events that prompted short-term market losses later led to a more stable investing climate across all industry sectors. But still keep in mind that past results are not indicative of what will happen in the future. The more your portfolio is diversified, the less chance you have of one security or investment having a detrimental effect on your entire investment strategy. Bonds, stocks and cash are the three major asset classes. Within these asset classes, you can diversify further by owning stocks in dif- ferent industries and countries; purchasing different types of bonds and different types of short-term cash instruments. Defensive stocks typically outperform in a slowing economy or recession. These are typically stocks of companies that provide necessities like food, utilities, pharmaceuticals, toiletries or other con- sumer products with a short shelf life. The theory is that consumers will continue to buy necessities like food and address their medical needs regardless of economic conditions. As a result, companies that sell these types of products should not be as negatively affected by a slowing economy as companies that produce more discretionary types of products. It also is important to remember that even in good times the value of stocks and bonds go up as well as down. When the market is experiencing more volatile movements, gains and losses can seem enormous. It is important to keep your long-term strategy in mind when expe- riencing these changes and realize that they can balance themselves out over time. Unfortunately many investors associate a weak or volatile period in the economy as being the same as a weak time in the stock market, a perception that is not always correct. Not all market declines lead to a recession. The truth is that the United States economy is cyclical, meaning that it moves through stages of growth and decline, varying in duration. A mistake made by many investors is that they buy and sell securities based on fluctuations in the economic data currently being reported rather than anticipating what the economy will look like in six to 12 months (based on a variety of factors including leading economic indicators) and making their investment decisions based on that outlook. Most successf ul investors ta ke a long-term view — at least three to five years — rather than expecting stellar returns overnight or panicking when the value of their securities declines. While diversification does not ensure a profit or protect against loss, a long-term diversified investment strategy based on your invest- ment goals and risk tolerance can create a winning approach for you regardless of whether the economy is booming or experiencing a brief downturn. Paul Guerra is the managing princi- pal of Brookshire Wealth Management in Canton, OH. For more information vi sit w w w.brook shire wealth.com or e-mail Mr. Guerra at pguerra@brookshire financial.com. Investment products and services are of fered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Brookshire Wealth Management is a separate entity from WFAFN. ■ Wells Fargo Advisors does not provide legal or tax advice. Be sure to consult with your tax and legal advisors before taking any action that could have tax consequences. Please consult your legal advisors regarding your fiduciary duties. Investments in securities a nd insura nce products are: NOT FDIC-INSURED/NOT BANK- GUARANTEED/MAY LOSE VALUE Wells Fargo Advisors Financial Network, LLC, Member SIPC, is a registered broker-dealer and a sep- arate non-bank affiliate of Wells Fargo & Company. Maintain a Diversified Portfolio Even in Turbulent Times By Paul D. Guerra 3 2 | Cleveland/Akron/Canton MD NEWS ■ M D N E W S . CO M ■ M A R C H /A P R I L 2 0 1 4