“Are you bullish or bearish?”

“My interest is in the future because I am going to spend the rest of my life there.” – Charles Kettering

Are you bullish or bearish on the market? I get this question a lot.

Obviously I have my feelings on the attractiveness of the different stock markets. But in the grand scheme of things, how I think about being bullish or bearish has a lot to do with my personal time frame. That’s why it’s one of those questions that is impossible to answer without knowing a ton of information about the individual that’s asking.

Here’s a tweet I sent out last week to shed some more perspective on this topic:

life cycle

Saying stocks are risky investments is completely context and time horizon dependent. If you are a retiree you have different worries and objectives than someone just starting out in their career.  Your portfolio construction should account for this fact.

Life-cycle investing means that any market scenario will have different implications to different groups of investors. If you still have many years to save and invest you should actually welcome market volatility. If you will be spending down your portfolio volatility can be painful.

Unless you’re a pundit or fund manager you don’t have to view the markets in terms of bullishness or bearishness, just like it’s not your job to beat the market or a certain benchmark. Think about your portfolio and the markets in terms of where you are in your life right now and where you would like to be. These things should matter much more than how you feel about stocks right now.

Your portfolio should reflect what it is you want to get out of it. Everyone has different goals that they are saving and investing for – retirement, vacations, a down payment for a house, weddings, college for your children, etc.

While it makes sense to view your entire portfolio in aggregate for asset allocation and performance monitoring purposes you should really think about it in terms of multiple time horizons. A portfolio is really just a stream of assets to meet your future liabilities.

Here are some examples:

Stocks: Help you stay ahead of inflation and provide for spending needs that are far out into the future.

High Quality Bonds: Provide income and stability along with the potential for dry powder to rebalance during economic and stock market downturns.

Sub-Strategies & Portfolio TiltsDiversification to help during the bumpier investment cycles and rebalance to provide a smoother ride.

Cash (Savings)Protects from permanent loss of capital to use in short-term situations for emergency savings and spending purposes.

Human Capital (Future Income): Your future pool of savings to be able to add to your portfolio over time.

Age and time horizon aren’t your only determining factors for portfolio construction. You also have to think about:

  1. How much risk do you have to take to hit your performance target?
  2. What is your lifestyle inflation?
  3. Is your portfolio mature or will you be making substantial contributions for a number of years?
  4. How much of your portfolio will be required for spending needs in the near future?
  5. How much can you afford to lose in the short-term and still be on track over the long-term?
  6. Does your portfolio mix match your willingness and ability to take risk?

It’s difficult to precisely quantify these questions into a perfect portfolio, but that’s investing.  It’s about creating a system within a plan that gives you the highest probability for long-term success to reach your needs and desires.

Try not to think of the markets in terms of bullish or bearish, but better or worse for your own personal situation.

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. J. Money commented on Jul 18

    Does it say something that I read the title as “Are you Bull$hit or Bearish?” Haha…

    • Ben commented on Jul 18

      That would have been the more attention grabbing headline. I’ll save that one for my how to piss people off post.