Volatility in the stock market is a given. Yet when we go through a period of increase and calm, such as in 2019, it often takes us by surprise - especially when it’s swift and violent. What should you be doing right now?
Take stock of what is happening, and why. Movements in the stock market are usually made based on what investors believe will happen. It is easy to have a kneejerk reaction that may not be in your best interest. Get all the information you can about the situation, go deeper than the headlines! Think logically.
Timing the market can be challenging under the best of circumstances and volatile markets can magnify the impact of a wrong decision. Have a game plan! Emotionally, it’s easier to buy than to sell. If you are an active trader, you may want to determine in advance when you will take profits or cut your losses. If today’s the day your chosen sell price occurs, do it! You can second guess yourself for months to come.
Don’t forget, though, having an investment strategy is only half the battle, the other half is being able to stick to it. Even if you’re able to avoid losses by getting out of the market, will you know when it is time to get back in?
Before making any drastic changes, be sure your asset allocation is appropriate. Solid asset allocation is the basis of sound investing. One of the reasons a diversified portfolio is so important is that strong performance of some investments may help offset poor performance by others. With regular portfolio rebalancing, you may be able to keep appropriately invested even when times seem bad.
Many people invest for the long term so short-term market movements are not as great of a concern. Remember, long term doesn’t just mean the day you retire. Many people retiring today will live 30+ years in retirement. Though past performance is no guarantee of future returns, of course, the stock market’s long-term direction has historically been up. If you can hold up now, it may hold you up in the future!
Don't hesitate to call me if I can be of any assistance.
Laura Mickels has spent more than 30 years working for investors with both Wall Street and independent firms. CochranMickels Retirement Specialists provides personalized planning and investment services to individuals approaching and in retirement. These are the opinions of Laura Mickels and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.