Gut Check in Rocky Markets

Have you asked yourself lately…

• “Is this the ‘Big Dip’ in the markets they have warned about?”
• “Should I be selling my stocks?”
• “Should I be selling my bonds?”

Although I stress to clients and friends NOT to listen to the Talking Heads on TV, radio & internet—and then make rash investment decisions – when these media personalities comment on dramatic market moves (they LOVE down markets for hype), we are human!  It is nearly impossible to ignore completely what is going on daily in the markets.  And the stock markets have crept down a bit over the past few weeks.

STILL, I stress to my clients and friends: Do NOT allow daily, weekly, even monthly market moves to instill fear and lead to poor decisions.

Here is a checklist of why you can—and in most cases SHOULD – be able to stick to your current positioning, given you had a PLAN in the first place:

1. Your cash level – Is your level of cash sufficient for your CURRENT (i.e. 1-3 months) bills?
2. Do you still have your job?  (i.e. your income)
3. Do you still have your Emergency Fund intact (i.e. 6-12 months of emergency savings in the case of job loss or other emergency)?
4. Do you already have a Plan in place? (For help with what this means, please call me)
5. How is your progress toward your short-term and long-term GOALS?
6. Is your “asset allocation” still roughly intact (i.e. your long-term “set” proportion of Stocks vs. Bonds vs. Cash)?
7. When is the last time you heard from your Financial Advisor?
8. Are you scared?  If YES (which is perfectly reasonable!), what are you scared of?
9. Why are you investing in the first place?  Is it for later in life?  Retirement (which could/could not be around the corner)?  Kids’ college?  To live on the current dividends and/or interest from your investments?

If you can answer most or all of these questions with positive, rational answers, then there is little to NO reason to sell any of your investments in a rocky or down market.

In a down market, if you have been waiting for a “buying opportunity” to invest some of your cash, then it makes sense to speak with your financial advisor about how to deploy that cash according to your agreed upon “asset allocation.”

Conversely, in an UP market, if you have seen your stocks become a disproportionately HIGH percentage of your overall portfolio, perhaps it is time to “rebalance,” keeping in mind any tax consequences.  For more on this topic, please call me.

If you find that you are scared, identify what it is that you are scared of.

• Is it “losing everything”??  With history as a guide, the “losing everything” scenario is extremely, extremely unlikely—unless you have an outsize % of your monies invested in a very narrow list of securities or you have most of your monies tied up in a business (i.e. you are not diversified). 
• Are you scared of not being able to achieve retirement??  Then this is more a matter of how much you SPEND vs. how much your stock or bond portfolio has gone down.  OR, it may be a matter of analyzing how much you have saved plus how much you are still currently saving.  How long is it until you propose to retire?  How much CASH do you currently hold?
• Is it that you will run out of cash?? Do you have a “peace of mind” amount of cash on hand today?  Yes, “Cash is King” for that peace-of-mind feeling.  Although holding too much cash can hold you back from keeping up with inflation over the longer-term.  Talk with your financial advisor about an intelligent amount of cash to have on hand.

I just started thinking about one of my favorite Eagles songs… “That peaceful, easy feeling…”