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Unrest in Egypt – should I change my portfolio holdings?

Feb. 04, 2011 2:31 PM ET
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Regarding the recent and ongoing unrest in Egypt, we’ve received several questions from our members about the effect this could have on the market. Investors are wondering whether it would be wise to change retirement account investments. At this time, we don’t believe it’s appropriate to make fund changes or allocation updates based on the situation in Egypt. There are a few reasons for our stance. These include:

1. There will always be political and economic uncertainty somewhere in the world. Some situations are worse than others, but we need to understand the full impact of the situation before making decisions about investment holdings. Markets are forward-looking, and these short-term issues have, to some degree, been priced in already. Last Friday’s drop in the market was partially a result of the unrest in Egypt.

2. Egypt makes up a very small portion of the global economy. With the exception of the Suez Canal, the direct effects from this disruption should be minimal. Oil prices have already adjusted upward slightly, based on possible disruptions to production.

3. Egypt is considered an emerging market from an investment perspective. Any exposure to the country would be exclusive to our most aggressive investors. If you have some emerging markets exposure, remember that fund managers have discretion and are actively researching to determine whether they see opportunities in Egypt.

4. When we prepared our first quarter recommendations, we weren’t expecting the turmoil in Egypt, specifically; however, we prepared our recommendations for the likelihood there would be slight pull-backs. As the market continues to rebound, short-term pull-backs are expected, as we saw Friday.

The situation in Egypt remains fluid, and its outcome is still difficult to predict. We’re continuing to monitor the situation and its global impact and will make necessary changes to our recommendations if we feel it’s appropriate to do so. At this time, we’re holding steady with our first quarter recommendations – and we certainly do not recommend taking drastic action, such as moving to a cash account.

As always, feel free to call us at 877.627.8401 to speak with one of our investment advisers about your specific situation.

Jeff Studebaker, Investment Adviser

About Smart401k

Smart401k is a web-based investment adviser providing unbiased advice to help employees invest in their employer-sponsored retirement plans. Smart401k provides service to almost 11,000 clients who collectively have more than $1.5 billion in assets. Individuals receive personalized investment recommendations based on the funds in their plan and support of professional investment advisers available to answer all investment questions. Based in Overland Park, KS, Smart401k can be found at www.Smart401k.com.

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