The photo shows a familiar medicine that buffers stomach upset and treats a headache. When we reach our personal threshold for tolerating digestive discomfort, the fizzy water is there if we keep some on hand. Declining stock markets bring us up against another personal threshold, this one for financial discomfort. It is our nature to sell off stocks when we think we will lose more in the next market session, even though we know full well it is the worst time to sell. The “medicine” in this case is to recognize our personal threshold for market risk, and then add a sufficient amount of fixed income assets –bonds and cash—to buffer our stock holdings well enough to keep the possibility of market discomfort within tolerable bounds. Whether it’s indigestion or a falling market, in each case the right dose of “medicine” can bring a satisfying measure of relief if we plan ahead… a simple strategy indeed.
Recent Fountain Pens