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Misconceptions About the Market: Are You Prepared?
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If you enjoy fine literature, we recommend all of Warren Buffett's annual
Berkshire Hathaway shareholder letters, dating back to 1965. While financial reports are rarely the stuff from which dreams are made, Buffett's way with words never ceases to impress. His most recent
2016 letterwas no exception, including this powerful insight about market downturns:
"During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy."
This actually is a good time to talk about scary markets, since we haven't experienced a severe one in a while.
For example,
the CBOE Volatility Index (VIX), aka, "the uncertainty index," is a generally accepted gauge of how confident (or not) investors are that the market is going to be volatile (or not) during the next little while. The lower the number, the smoother the presumed ride ... although, as usual, there are no guarantees the markets will actually do as they're told.
As of July 28, the VIX was hovering in the range of 9.4-16, year to date. To put this in context, the VIX peaked at about 60 during the bear market of 2007-2009. You'd have to go back just over a decade to witness similar periods of relative calm.
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Take More Risk in Life and Less in Investing
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"I just really wish I'd taken more risk in my investment portfolio," said no one-ever-on their deathbed.
That may seem like an odd observation, unless you consider the fact that I had the privilege of spending a couple days recently with life planning luminary George Kinder. Among other benefits, I was able to reacquaint myself with his
famous three questions, elegantly designed to progressively point us toward the stuff of life that is the most important-to us.
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Are You Ready to Simplify Your Complex Financial Life?
When is the last time you've taken a good look at your personal wealth: Are you taking on too much risk? Are you paying too much in fees? Do you own investments that you don't understand? Can't keep track of what you have?
Let's have a Cogent Conversation®
when we will hear what you have to say and offer an objective second opinion on where you stand today and whether you're on track toward your personal financial goals. Click the button below to get started or just give us a call.
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2016 ©Cogent Advisor LLC. The information and opinions contained in this newsletter are for informational purposes only and they are not intended to serve as specific financial, legal, accounting or tax advice.
Because every situation is unique and fact-specific, you should consult a professional who can thoroughly review and analyze all aspects of your particular situation before making any decision or taking action.
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