It was Morningstar Inc.’s biggest conference ever, in terms of attendees and marquee names on stage. Some 1,600 individual investors, financial planners and money managers gathered in Chicago earlier this month to listen to the best and the brightest talk about the pressing financial issues of the day.

If you missed the conference, you can live without the details of the speeches, the occasional stock tip and the inner workings of various portfolio-management strategies.

What you can’t live without are the questions that arose through the various sessions, ones that individuals — hearing the tone and tenor of experts who are nervous about the direction of the market — should be asking themselves about their own portfolio and money-management style.

Here are the questions that, as the conference unfolded, I thought every investor should be asking themselves now. Take a look, and then answer the questions honestly for yourself.

1. Which markets do I invest in, and which should I avoid?

There are a lot of ways to invest. You can make it as simple as owning total-market stock and bond index funds and tinkering with the mix, or you can own multiple funds in every asset class and category.

For individual investors, however, the key to any investment may be the thesis behind it — the reason for taking a chance inmodities, emerging markets, or domestic stocks.

In market times as uncertain as now, there’s probably nothing as important as knowing what you arefortable owning and holding through the turbulence, and what makes you nauseated.

2. Which markets do I know well enough to invest in on my own?

If you get excited about the economic future of, say, Brazil, you need to decide if you want to invest specifically in that market, or whether you want to get your exposure through something more diversified, such as a fund that focuses on the BRIC nations (Brazil, Russia, India and China).

Moreover, if you are the type of investor who wants to do it yourself, you need to decide if you believe you really can do better than a pro, who at least has the resources to diversify widely and minimize pain if one investment decision goes wrong.

3. Does my asset allocation reflect my age and my thinking about the long haul?

A long-term strategy means having investment principles and finding ways to achieve them. That said, many investors are a bit too happy with what has worked for them recently, at the expense of protecting themselves for when the market turns and favors a different strategy

4. How much confidence do I really have in my mutual funds?

The big news from the Morningstar conference was the firm’s decision to issue forward-looking analyst’s ratings, basically listing the funds that Morningstar believes will do well in the future. The interesting thing is that plenty of issues that get a top “star rating” from Morningstar will get neutral or negative analyst’s ratings.

5. What about my investments keeps me up at night?

Every money manager had their own answer for this question, but the truth is that they were all preparing for the worst in some way. Individual investors should do the same.

Whether it’s debt woes in Europe, the economy in China, the potential for renewed terrorist activity or something else, investors should look carefully at what scares them, and how they would respond if their nightmares were tomorrow’s headlines.

Worrying about these potential events without thinking about the appropriate response if they be real means you are likely to lose both sleep and money.

Chuck Jaffee can be reached at cjaffe@marketwatch

Similar Posts:

Share