Investing Conventions Out the Window
Today I read again about how the bond market may be in trouble. So this throws in doubt the conventional wisdom about being invested in bonds as a safe investment. This long time asset allocation truism may be starting to crack. By the time the average retail investor finds out, it may be too late for them and their retirement funds may take a huge hit, especially this summer. For those interested and concerned about this, there might be still some good stocks to buy in this climate.
The big thing to worry about is the end of quantitative easing round 2 that will happen in June. The Fed probably won’t do a third round. That means money is not going to be as cheap as it has been over the last couple of years. There is a lot of debate over whether this actually did anything for the economy. What it did in the short term at least was boost the stock market as well as the bond market. But the ending of this monetary policy by Ben Bernanke will end and so will the rallies that we have been seeing in the financial markets. These will have huge impact and the best investments may have to be found elsewhere.
You may need to once again look at large cap stocks. The advantage here is that these are strong companies, many with good financial health. Strong fundamentals mean that there will be less volatility in the short term when small caps and now bonds will go nuts over the new monetary policy coming down the pipe.
Use good judgement and get a registered investment adviser to walk you through this. Generally, a fee based financial adviser might be the best choice in this scenario because being out of the market altogether in the next several months may need to be an option for you.