Currently, investors are fighting the battle of Europe, which has already lasted two years. Investors are tired and battle-weary. They live in fear of each new headline out of Europe. They are always listening for a rumor, any rumor, true or not. They get ambushed by legal and political arrangements they are unfamiliar with. They live minute-to-minute, waiting for an incoming round of destruction. When they get ambushed by a surprisingly poor U.S. jobs report, for example, they get “trigger happy” and start selling. The urge to vomit and/or panic starts to rise.
But, the odds of winning any battle are greatly improved by having a battle plan beforehand. You know the first objective is to live to fight another day, while still taking the bridge or the town or holding a ridge. You have been briefed on the enemy and their techniques. You have planned for them. You know to expect changes on the battlefield. You adjust for them on-the-spot but stick with the battle plan.
For investors, you know your objective is to protect your portfolio for the long-run. You know there will be changes that you must adjust for — by increasing cash or reducing exposure to some sector of the economy or whatever — but you stick with your battle plan . . . even when the urge to vomit and/or panic suddenly hits you!