Wednesday, July 27, 2011

What should I do with my investment portfolio as the deadline approaches and no agreement is yet in place?

By: Joanna Bewick, Portfolio Manager, Fidelity Strategic Income Fund, Fidelity Strategic Dividend & Income Fund, and Fidelity Strategic Real Return Fund.

It is understandable that investors are anxious about policymakers’ ability to reach agreement on the debt ceiling. While the debt-ceiling debate may pose a unique risk, it’s important to remember that event risk is endemic to the capital markets. The key to weathering these risks is preparation. Investors must have a sound investing plan that focuses on building a well-diversified portfolio that balances their unique time horizon, risk tolerance, capital appreciation, and income needs across a variety of market environments. Indeed, a rigorous investment plan is timeless and transcends current events.

Take a long-term view and continue on a steady investment course, but revisit your investment objectives on a periodic basis to ensure that the plan is current and reflective of your long-term goals. Moreover, near-term volatility may present an opportunity to rebalance if market moves cause your portfolio to stray from your asset allocation targets.

Now, more than ever, investors must not let the uncertainty of short term events cause them to make rash portfolio decisions. Trying to time market gyrations is difficult and often costly. History has shown that near-term market declines, although unnerving at the time, are often followed by rebounds. In many cases, investors are better served by remaining fully invested over a market cycle, enduring near-term volatility but not missing out on the subsequent recovery. Give your investment plan time to work for you over the entire market cycle.

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