After back-to-back years of strong market performance, a familiar question is surfacing: Should I be getting more defensive? In this episode, Tim and Tony explore why good times often breed anxiety—and how to know whether action is warranted or staying the course is the wiser move.
Key Insights
The Two-Tenths Rule: A study of bull markets found that the first and final tenths produce the strongest returns. Strip those out, and equity performance can be lackluster. Missing either end is costly.
The Double Timing Problem: Market timing requires being right twice—once on the exit, once on the re-entry. Most investors underestimate how difficult that second call is.
Three Questions Before You Act:
Do I have a plan in place that I can clearly explain?
Has something material changed in my life or finances?
If so, does that change necessitate a portfolio adjustment?
Volatility Is the Price of Admission: The expectation of higher equity returns exists precisely because we must be willing to endure the ups and downs.
Bottom Line: A premeditated, bucketed approach—Grow, Protect, Give, Live—keeps your decisions objective rather than reactive to headlines. If nothing in your life has changed, inaction may be the path of wisdom.
