Thursday, May 18, 2006

Stress test your portfolio

Well, I've been meaning to write this for about a month, but just haven't gotten around to it. So this is going to be a quick note, rather than a more detailed bloggering.

The past few days have suggested that perhaps the market was ringing a bell. However, one never quite knows exactly what the future holds, only that the risks of a market decline seem more elevated than in the past couple of years.

Against this, of course, is the thought that market timers are rarely successful - but on the other hand it doesn't take a genius to pull a little bit of funds out of a richly valued market, and/or to re-position some other higher-risk holdings into holdings with more conservative features - i.e better valuation metrics, and nice things like cash on the balance sheet.

I've been doing so over the past month or so, but still remain with some 70% in the market - but this is probably the lowest market penetration I've had in 15 years of investing.

Make sure you stress test your portfolio ... when I look at the number of charts that have arced skyward in the past three months, it tells me that market risk is unusually high ... as they used to say in Hill Street Blues ...

"be careful out there"


The Confused Capitalist

No comments: