The wise King Solomon noted there is “a time to keep, a time to discard” — but how would he play today’s volatile markets? Would he maintain a fully invested portfolio (“keep”) or go to cash (“discard”)? What investing wisdom can be gained in a world of dizzying change?
An emerging consensus has it that we’re living in a new world with a “new normal” as PIMCO CEO Mohamed El-Erian puts it. Forbes columnist and Fisher Investments CEO Ken Fisher is prominent among those who dissent from this view, but assuming for argument’s sake that the world is changing in some significant way, how should that inform one’s investing decisions?
Perhaps the first principle we can apply to this question — and the only one that no one would disagree with — is that nobody knows for sure what the future holds; therefore, most people unwilling to bet all on a certain vision of the future must hedge to some extent. Or, as Solomon put it, “distribute portions to seven, or even to eight.” Judging from the wise king’s next words (“for you never know what calamity will strike the land”), it seems safe to say Solomon was thinking in terms of broader asset classes, i.e. if the land has a bad year, it will help to have commercial business interests, commodities, currency, etc.