Have you ever heard about a concert where there is some disastrous event and everyone was trying to get out via limited exit space? People get hurt and trampled. Before the disaster, everyone is complacent until the moment of disaster and then it is a mad dash.
To avoid the rush in investments, it is essential that investors have evaluated their portfolios and have taken the proper steps to be safe. Should they need to "get out of the door", a plan should be in place. This is the kind of processes that our military and police implement every day. They train, train, train for potential difficult situations. Investors should do the same in the management of their portfolios too.
Questions to ask are:
- Can a quick exit be made to get “out of the door”?
- Is there a plan in place?
- What kind of margin of safety is available?
- Are the holdings resilient to a market downturn?
- Are the financial, economic and business fundamentals of a portfolio's holdings strong?
- If holdings are kept, is there sufficient ability to hold for the duration of a downturn?
- Are people prepared mentally?
There are a ton of more things to think about. The time to prepare is before something happens. The military and police regularly go through multiple scenarios to determine courses of action in challenging situations. Then, they drill on the ways they want to address specific situations.
No one knows when or if something will happen, but it is sure good to have been prepared before the event. It reduces injury!
Think of it this way. The best time to get an umbrella is on a sunny day when most people don't have the slightest interest. When it is a downpour and you are prepared with your handy umbrella, you can be "Singing in the Rain!"
