This is a very relevant article by Vanguard titled “Feeling panicky? Here are four reasons not to overreact”. The article describes the natural inclination to bail out of investments when the market tanks. Unlike our clients who held firm to our long-term strategy and benefited as the market recovered, most individual investors bailed out and took permanent losses.
Inflation is a big concern for investors and it is an especially big concern today when the federal government is printing money and borrowing trillions of dollars in order to heal the economy and fix the financial system. While higher inflation sometime down the road is a certainty, this JPMorgan white paper suggests it will be further down the road than most investors expect. They make a compelling argument that we will not see significantly higher inflation until the unemployment rate comes down and employees have greater power to demand higher wages.
Balancing Your Fixed Income Decisions
Fixed income can play an important role in a portfolio. But its role may vary according to an investor’s financial needs and concerns. For example, many investors look to fixed income for safety, income, and more stability in their portfolios. They must weigh these priorities against their concerns over future interest rates, inflation, government debt, and other factors that might affect fixed income returns.