Russia, Ukraine, and Your Portfolio

Mark Meredith, CFP®

Originally posted 02/15/2022

“Investment performance doesn’t determine real-life returns; investor behavior does.” – Nick Murray

I’ve fielded a few inquiries recently regarding the fear over the Russia-Ukraine tensions, and how one’s portfolio should be altered to account for this risk. Not to be dismissive, but we’ve seen this story quite a few times in recent history. Let’s look back on some of the news on this situation over the past 8 years:

Now some of you will say “it’s different this time”, and you might be right. Some thought the border tensions were “different this time” in 2014, 2015, 2016…..and surely it would have been best to avoid the stock market. But of course global stocks as measured by the Vanguard Total World Stock ETF (VT) compounded at 9.59% annualized from 04/01/2014 – 01/31/2022.

When you are considering a large market timing decision based off a piece of news like this, remember to ask yourself the following:

  1. Am I the only one aware of this situation, or is it well known?
  2. If it is well known, isn’t likely markets have already priced in the risk?
  3. Do I have a greater insight to the situation than the collective wisdom of all market participants? If not, I am merely making a bet that the situation will be much worse than the market thinks.
  4. How have my past predictions been on market timing decisions?
  5. How will I re-enter the market if I am wrong and the market rallies while I’m out?
  6. How will I re-enter the market if I am right?

One cannot even begin to make a market-timing action without addressing the questions above. From what I have seen, the gut reaction to exit equities is an emotional decision and not grounded in a well thought out process. In that case, as well as most others, it is best to stay the course.

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