In the current bear market, many investors have learned a compelling lesson: It's impossible to control events in the financial markets, but we can control how we react to them. In that spirit, it may be time to focus on portfolio repair strategies that may help you pursue longer-term financial goals.

Reassess Your Risk Tolerance

Your reaction to single-digit declines in the value of your portfolio may provide a clue as to your feelings about risk. If relatively small drops leave you feeling anxious, consider this reaction when making decisions about how to invest. Stocks historically have experienced short-term ups and downs, and this volatility is likely to affect your investments if you own stock or stock funds. Although volatility on the downside can be unsettling, keep in mind that missing out on stock market rallies could cause your portfolio to forfeit growth over the long term.

Rebalance Your Investment Mix

As part of your risk assessment, review your mix of stock, bond, and cash investments. Many investors strive to maintain a target mix that can help balance their exposure to risk and return. If you have not changed your investment mix since the beginning of the current bear market, you may find that movements in the financial markets have caused your investment mix to drift significantly from your target allocation. It may be time to rebalance, which entails adding to positions that have declined in value and reducing your exposure to investments that exceed your target allocation. It may sound counterintuitive to add to positions that have gone down, but rebalancing provides a framework for buying when prices are low, which may enhance your chances of long-term returns.

Consider How Much You Need to Invest for Long-Term Goals

Many investors, especially those who plan to retire within a decade or less, have been affected by losses in their portfolios. If you are approaching retirement, you may need

to reassess how much you need to invest on an annual basis, and how much longer you need to continue working, to replenish your retirement nest egg. You may need to undergo a similar analysis if you are investing for another goal, such as funding a college education. Your financial advisor can help you identify taxadvantaged accounts for retirement and
college savings.

Evaluate Both Growth and Income When Selecting Investments

During the current bear market, many investors learned that capital appreciation cannot be taken for granted. You may want to make sure that your portfolio includes some investments that generate income. Examples may include dividend-paying stocks, bonds, or mutual funds that invest in them. When evaluating bonds or bond funds, remember to diversify according to sector and maturity.

Determine Whether You Can Reduce Spending to Fund an Investment Plan

You may find that you can cut expenses in areas that will not significantly impact the quality of your life. Consider how much you spend on unused memberships, premium cable channels you never or rarely watch, or services (such as house cleaning or yard work) that you could do yourself. In addition, paying off a small credit card balance or loan could result in a savings on interest payments over time, with the savings applied to an ongoing investment plan. There are no guarantees in the world of investing, but these and other strategies may help you focus on the future and make a renewed commitment to long-term financial goals.

For more information or to discuss what investment options make sense for you, contact one of Southern Community's Wealth Management professionals at
(336) 794-7832.