Our core retirement portfolio holdings have delivered some nice gains over the last six months. Unfortunately, world events are creating a greater risk of another significant market decline. Even if the economy itself remains relatively stable, increasing oil and other commodity prices may create such fear that investors will hit the “PANIC SELL” button in large numbers. I can’t allow a collective market freak-out to cause us to lose all of our recent gains.
< To compensate, I placed new stop loss orders on our core holdings. These stop loss orders included increased sell prices that locked in at least some of the recent market gains. The market would have to drop significantly to hit the sell prices but anything can happen now, with the entire middle east in turmoil and a possible government shut-down in a week.
We have significant money in cash equivalent holdings right now, ready to purchase more TIPS at an appropriate future auction. I’m considering making some TIPS purchases on the secondary market and/or moving some of that money into a real return fund that has significant commodity exposure. That will increase our hedge against skyrocketing oil, gas, and food prices that seem to be in our future. Our 401k plan provider includes a real asset return fund in its standard investment options. I may move some money into that pending another TIPS purchase.
These are volatile times and I intend to be ready.