Preparing for the Bear Markets

Prudent investors are already prepared for the next 
bear market holding a balanced portfolio that reflects 
their investment goal, investment time horizon, risk 
tolerance, and financial condition. We recommend that 
you take the time now to review these four factors to 
ensure that your current asset allocation or mix of 
stocks, bonds, and cash investments suits your personal 
needs. 

Your goal. This is simply a purchase or series of expenditures 
you want to make at some time in the future. For instance, 
one goal might be to make a down payment on a house, while 
another might be to ensure financial security in retirement. 

Your time horizon. This is the number of years you have 
to invest before reaching your goal, including the period 
during which you are spending your investment. The time 
horizon for making a down payment on a house might be two 
or three years, while the time horizon for retirement 
might be 40 years, including your years in retirement. 

Your risk tolerance. This is the ability to endure the 
inevitable fluctuations that come with investing. Knowing 
that you have many years to reach a goal may make you more 
comfortable with investments, such as stocks, that are 
likely to provide higher long-term returns but also have
higher risks. Keep in mind that you can't avoid all investment 
risks, and, if you select only very stable investments, 
you run the risk of losing purchasing power to inflation. 

Your financial condition. This is the stability of your 
job and the state of your personal finances. A person with 
a steady job and well-established investment programs can 
afford to take on more investment risk than someone with 
an unstable job and few assets.