Your Mid-Year Investment Check-Up

Being a long-term investor wasn’t exactly easy the first six months of this year.

Between January 1^st and early April, the S&P 500 stock index fell more than 15%, and the Nasdaq 100 index of tech firms and other growth companies lost nearly 20%.

Fast forward to when I am writing this in late June, and both indexes have made up all those losses and are up a bit through the first six months of the year.

That’s an awfully fast turnaround, and one that I know has felt like a huge relief. It’s also an opportunity to recalibrate your investment strategy.

I hope you resisted any urge to sell stock holdings during the worst of the market declines earlier this year. Once you lock in lower values, you can’t easily make them up. And the markets have delivered a quick reprieve: those early losses have been made up.

But if you were anxious during the market sell-off in the first half of the year, now is a good time to think through whether it is indeed time to reduce your overall allocation to stocks.

Each of us has to know what will work for us. And what worked for you 5 or 10 years ago may not be the right strategy for you at this juncture of your life.

For many, I think continuing to own some stocks in retirement is a smart way to guard against inflation. Over long periods, stocks have delivered the best inflation-beating gains. And if you are 55-60 today, you need to anticipate what your basic living costs will look like 20 or 30 years from now.  But the 80% or more you had invested in stocks in your 40s may not be what you need or want in your 60s or 70s.

If you are already retired, I hope you have at least two to three years of living costs in cash. That’s how you ride out the next wave of market volatility, and the one after that. Being able to cover your living costs without touching stocks when they are down (other than required minimum distributions from retirement accounts) is how you sleep soundly in retirement.

Don’t have that much in cash? Well, now that your stock portfolio has recovered, it can be a good time to shift some of your money into cash. (This cash is in addition to the 8 months to 1 year of living costs you should have to cover emergency savings.)

While none of us has a crystal ball for what is next for the economy, and investments, I think it’s wise to assume we may be in for more volatility as our economy and the world wrestles with the ramifications of proposed tariffs, and the impact of AI on hiring demand for certain types of jobs.

That doesn’t change the long-term argument for owning stocks. But it may require having the patience and fortitude to ride out more stock market swings in the short term. Recalibrating your overall investments in stocks to match your risk tolerance and your needs is smart prep work for whatever lies ahead.