Restructuring your investment portfolio is both a defensive and strategic move.
When the economy is down, companies often “restructure.” They scrutinize their expenses to see what changes will make them more efficient. Sometimes they’ll try to alter the terms of repayment of debt; perhaps they’ll close some divisions or lay off staff. Those moves would be considered defensive, and may be critical for the long-term survival of the corporate entity.
Other restructuring could be considered strategic. A company’s CEO may see potential in a new marketplace; he might consider adopting a new technology to enhance the effectiveness of his staff; or he might look for another company that is also suffering and try to acquire it. A smart CEO knows that “bad times” is just a point of view, and could just as easily be referred to as “potential opportunities.”
Even if your business card doesn’t list you as CEO of a company, consider yourself the CEO of your family’s finances. If your personal portfolio has savings, stocks, bonds, real estate, etc., you may resemble a corporation more than you know. When the media cries out about high oil prices, dropping stock markets and inflation, rather than panicking, put yourself in the place of a corporate president. Assemble your board of directors (which, in your case, might include your spouse, financial adviser, tax professional and insurance agent) and consider the opportunities:
Will the market go down forever?
If you think the market’s fluctuations will continue, try to think about the areas of the financial world that may begin to swing up soon. Are there good companies out there that have been beaten down and now are oversold? Just like one company might buy another (think of JP Morgan buying Bear Stearns), you can buy shares in a company on the open stock market. If you’re not sure which stocks to buy, you can use a money manager to do the research and make the decisions.
If you think of difficult times as a restructuring opportunity, you may find some great investments. Always remember, though, past performance is no guarantee of future returns.
Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.