Jeremy Glaser: Stocks sold off late Tuesday after President Trump said that North Korean threats would be met with "fire and fury." With no obvious end to the conflict in sight, it seems likely that worries about an armed conflict will grow, and there's a possibility of a return of market volatility.
There are, of course, important political and humanitarian questions at play, but investors face questions, too, about what to do to safeguard their portfolios. There's no one-size-fits all answer to this question, but investors would be well-served focusing as much as possible on what they can control and less on what they can't.
For example, it's impossible to know what path this crisis will take and what impact it will have on markets across the globe. Trying to time the market by selling out of certain assets is unlikely to be a successful strategy. And our investor return data shows that it's a strategy that hasn't worked historically.
This isn't to say investors need to sit idly by. With stocks close to record levels it is not a bad time to take a step back and evaluate your personal situation. One important question to ask is if your portfolio allocations are where you want them to be. With the runup in stocks, many investors may find that they are holding a bigger chunk of equities than their risk capacity may dictate. It may be time to take some of that risk off the table. Historically, bonds have been a great diversifier and provide important ballast for portfolios. Investors, particularly those close to retirement, should make sure they have an appropriate amount even though rates are still near historic lows.
It's also important to make sure to have adequate cash reserves to meet near-term spending needs so there is no need to dip into long-term assets unnecessarily.
We don't see a reason for investors to panic, but rising valuations and tensions do provide an impetus to make sure your financial plan is in good shape.