Gut Check (Again) In Rocky Markets

From the archives of TGIF 2 Minutes comes a very handy message – one that still holds true 5 years later:

blue and yellow graph on stock market monitor
Photo by energepic.com on Pexels.com

August 2014:

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 amidst dramatic market moves —and then make rash investment decisions – we are human! It is nearly impossible to ignore completely what is going on daily in the news and markets. And the stock markets have crept down a bit over the past few weeks. (Note, in 2019 the downturns and recoveries have been often.)

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. Cash level – Is your level of cash sufficient for your CURRENT (1-3 months) bills?
  2. Do you still have your job? (as in, your income)
  3. Do you still have your Emergency Fund intact? (6-12 months of emergency savings in the case of job loss or emergency)
  4. Do you already have a Personal Financial 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? (See # 4) Is it for later in life? Retirement which may or may not be soon? Kids’ college? To live on the current dividends and/or interest from your investments?

If you can answer YES to # 1-6, then there is little to no reason to sell any of your investments in a rocky or down market. If you have been waiting for a down market 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.

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 have most of your monies tied up in a business (these are two examples of NOT being adequately diversified).
  • Are you scared of not being able to achieve retirement?? Then this is more a matter of how much you SPEND than how much your stock or bond portfolio has gone down. It may be a matter of analyzing how much you have saved plus how much you are still currently saving.
  • Is it that you will run out of cash?? Try asking yourself: How long is it until I propose to retire? How much CASH do I currently hold?
  • 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”…

 

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