Steps to take in a jittery market

It’s difficult (if not impossible) to say what stocks will do in the near term. And well-meaning investors who are trying to do the right thing by not being too hands-on with their portfolios (see this market timing article) can end up, inadvertently, with an investment mix that’s too risky, simply because they’ve been letting their winners ride. So, here are five steps to conduct a quick portfolio stress test to see if it’s time to talk with your Azzad advisor about making a change. 1. Check up on your baseline stock/fixed income mix In strong markets like the bull market that has prevailed since early 2009, most investors tend to leave well enough alone. But if you haven’t reviewed your portfolio’s allocations recently, use the market volatility as an impetus to do so. A hands-off portfolio that was 60% equity/40% fixed income in early 2009, for example, could be more than 80% equity today. And meanwhile you’re older, which means you should likely be in more conservative investments. Rebalancing is in order in many situations. As discussed here, rebalancing can help align your portfolio’s allocations with your risk tolerance, which is your ability to withstand losses without having to

September 4, 2019 No Comments

Getting ready for the next recession

It’s only natural to talk about what might be ahead for markets and the economy. We’re currently living through one of the longest economic expansions on record (120 months and counting). This means looking ahead to the next recession. A recession, sometimes called a “contraction,” refers to a decline in economic activity and is, unfortunately, a fact of life in the business world. They can sometimes trigger steep declines in the stock market, and that’s one of the reasons we are always on the lookout at Azzad. We need to know where markets might be headed when the next recession happens, which it inevitably will. It’s not a question of “if,” but “when.” Research shows that although there have been 11 recessions since World War II, only three of them triggered particularly severe market downturns: 1973-1975 (market decline of 48%), 2000-2001 (market decline of 49%), and 2008-2009 (market decline of 56%). Looking at the causes of each of those recessions/bear markets, each of them followed a unique series of circumstances in economic history. The 1973 recession was triggered by an oil embargo targeting the United States, and the 2000 and 2008 recessions were largely due to bubbles in the internet

August 1, 2019 No Comments

Preparing for the next recession

We’ve been talking a lot around the office lately about the next recession and how to prepare our clients for that eventuality. It’s part of our job at Azzad, making sure we’re looking ahead to the next big thing or market-moving event. And it’s only natural to talk about what might be ahead because we’re currently living through one of the longest economic expansions on record (120 months and counting). A recession, sometimes called a “contraction,” refers to a decline in economic activity and is a fact of life in the business world. Recessions can trigger steep declines in the stock market, which is one of the reasons we keep abreast of the health of the U.S. economy. We need to know where markets might be headed when the next recession happens, which it inevitably will. It’s not a question of “if,” but “when.” Research shows that although there have been 11 recessions since World War II, only three of them triggered particularly severe market downturns: 1973-1975 (market decline of 48%), 2000-2001 (market decline of 49%), and 2008-2009 (market decline of 56%). We’ve been looking at the causes of each of those recessions/bear markets, and each of them followed a

July 2, 2019 No Comments

Are you a risk taker? If you invest, the answer is yes.

For each individual, the word “risk” evokes a different image or experience. A person’s perception of risk can be shaped by past experiences, recent stories in the media, the latest investment-related study, and incidents recounted by friends and associates. Too often, it’s these factors and not actual probabilities that shape an individual’s expectations for the future. “Recency” is the tendency to place more weight or significance on recent and current events than on past events. From a recency perspective, when the market is going up, investors project that it’s going to keep going up, and therefore invest more money. When the market is declining, investors don’t invest — or they sell — because they project that the market is going to keep declining. In the excitement of sustained bull markets, such as the exceptionally strong bull market of the late 1990s, investors become overly optimistic and underestimate or ignore risk altogether. Ironically, at times like those, many investors view the level of risk as being very low. Actually, it’s the opposite. It’s only when things go badly that investors realize they should be thinking about risk. Sometimes, they discover they are not as willing to take on as much risk

February 12, 2019 No Comments