Investment success sometimes requires quick changes in the strategies. Waiting for more information or for the dust to settle is the common traps for being caught in the downdraft.  In fact, diversifying across asset classes as well as within asset classes is a smart way to go.  Diversification doesn’t ensure a profit or protect against a loss in a declining market.   However, it can reduce the downside risks.  Although the current market condition continues to be bullish and new highs in the indexes are set frequently.  Maintaining bullish attitudes and approaches can be risky.  The question to ask yourself is whether you’ll want to consider rebalancing your investments.  If you are currently 90% stocks, 10% bonds, should you consider 70% stocks, 20% high-yield bonds, and 10% money market.

While investing for your retirement is important, having cash in your pocket when you need it is equally crucial.  Balancing funds you’ll need in the next three to five years among a money market account, a savings account, and ‘high quality’ short term bonds.  This way, you won’t have to sell your investments at a loss if your money is tied up in stocks. Actually the biggest risk in investing involves needing your money at the wrong time, and you cannot predict when the emergency may occur.  Investing in stocks is usually the best options, but preserving emergency funds when you need it is equally important.  This rule of thumb is keeping cash you may need relatively shortly readily available by investing in the short term investment instruments that can generate income for you and keeping the investment risks low.