One thing that has come out of the double-whammies — the March 2000 through March 2003 agony and then the 2008 mess (I call that one the Great Debacle) — is volatility.
It used to be that a bull market was, well, bullish (think about the '90s) and a bear market was — you got it in one! — bearish (how about the '70s?). These days it is hard to tell, isn't it?
It's hard for trend-followers, too. Many third-party managers try to find a trend and then follow it appropriately, shorting things if its bearish and going long if it looks like a secular bull. These days, it's hard to spot anything like a trend, even though, on balance, last year was rewarding.
Choppy or not, whether the general motion is up or down, focus on the general motion and be careful by:
- Investing in global brands that pay good dividends and have relatively low P/Es.
- Hedging with some inflation-protected bonds (maybe the TIP ETF, but not too many shares).
- Seeking out some flexible and conservative plays like James Balanced: Golden Rainbow, Ivy Asset Strategy, First Eagle Overseas or Global, Blackrock Global Allocation, PIMCO Global Multi-Asset and the IVA funds. It's interesting to combine James Balanced: Golden Rainbow with one of the worldwide flex funds, with James being a bit less risky in my judgment.
The trick is to be careful, right? When the seas are choppy, good balance becomes very important. The ship needs the right amount of ballast, in the right spots, and a steady hand at the helm.
