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How You Can Protect Your Investments from a Crash

Certified Financial Planner Stephen Rischall was featured once again on KNX 1070 In Depth Newsradio where he discussed the current situation of the stock market and whether we should be expecting a crash soon. Check out the live interview below to hear what he had to say.KNX 1070 & SMS Facebook Link Image

Host: Right now though what goes up must come down. We may not like it but it probably does apply to the stock market. With us now, Certified Financial Planner Stephen Rischall, with 1080 Financial Group in Los Angeles. So, Stephen new record up up up up up at what point do I start to get worried that it’s all going to come crashing down and I start putting piles of money under my mattress?

Stephen: Yeah you know the market is definitely at all-time highs. The thing we have to keep in mind is the price of the level of the market in itself as well as the length of time of the bull market run isn’t reason in itself for it to fall, but we are smart enough to know that the business and economy cycle do go up and down so it’s only a matter of time.

Host: So, what’re some of the other things perhaps on the horizon that you see that could cause this market to just go off a cliff?

Stephen: Yeah so, we definitely have some fundamental things that we want to be watching out for. Are consumers still going to be spending now after the holidays? How are savings rates? Are they deteriorating, are they improving? The other big thing we want to look at is consumer credit. So, there has been a bit of an uptick in subprime credit, so things like subprime auto loans, credit card defaults. Those might be some of the leading indicators you’re going to want to keep your eye on before it leads to some of the bigger things, like you know, previously we did have that mortgage meltdown.

Host: Is there something that people should do to try and get prepared or is it just more of a mental thing?

Stephen: There’s definitely a few things you really want to make sure you do to be prepared and I would say the number one is rebalancing. So, if you have a 401(k) at work or if you have a portfolio of any sort that you’re managing yourself, now would be a great time to protect some of those profits, get them off the table and reset, go back to your original investment plan.

Host: Well you know, every time the market starts going down, we always have somebody on the show who says pretty much don’t do anything, let it go, you’re in it for the long-term, but people get understandably scared. So, at what point should a person go, “ah, okay, I’ve had enough”?

Stephen: Right, I think that comes down to your individual circumstances. The key is having a game plan when you’re investing, right? There’s a big difference between trading which is more like gambling and investing which is for the long-term. So, if your time horizon is 10 years or more, you can stomach those losses. But, if your time horizon to retirement or needing to use this money for let’s say, a down payment for a home is more short-term, you’re going to want to make sure that in general your portfolio is more conservative. You’re not going to want to be holding on to things like emerging markets or even some of the stocks. They run up so high but you’re going to want to scale it back that you might give up some of the performance but you’re protecting yourself in the long run if and when there’s a downturn.

Host: What has this been like for you to watch it and you read the headlines and it used to be another record day for the Dow, another record day for the Dow, now it’s kind of like oh another record day for the Dow.

Stephen: You know I think we’re all kind of numb to it, right? Every day it seems like it’s another record but obviously it’s done very well for us and our clients. I think most people when they open up their account statements are feeling good about it. But as with emotions and how they affect us when money’s going down, it also affects us when money’s going up, so don’t let this euphoria get to deep ingrained in your head. Remember, it’s going to have to come down eventually. Let’s be smart, let’s stick to our investment plans, stick to your game plan, rebalance, reset, and make that smart, long-term investment decision.

Host: Alright, Stephen Rischall with 1080 Financial Group in Los Angeles.

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