We have received numerous questions from our clients, family and friends about what actions should be taken in light of the recent downgrades from Standard & Poors to our national debt, Fannie Mae and Freddie Mac, and numerous other agencies and banks. We think it is important to first understand the role of Standard & Poors in our society. They are an independent agency that rates the financial strength and the ability to repay debts on everything from countries to insurance companies. This link provides a brief summary of Standard & Poors: http://www.standardandpoors.com/about-sp/main/en/us. The downgrades most likely will result in very volatile markets and the length of this volatility is unpredictable. However, there have been fairly recent examples of countries that have been downgraded and their markets continue to prosper. Here is an article from Dimensional Fund Advisors about one such country: https://my.dimensional.com/insight/thewire/74104/. This may or may not be the case with our country. We believe that it is always appropriate to evaluate the amount of risk you are currently taking. It is important to only take the amount of risk necessary to achieve your goals. We also believe that capital markets are resilient and they are still one of the best ways to build wealth over the long term. This is why we continue to be optimistic.
Ben Coakley
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