Gut Check in Rocky Markets… 2021 Version

From the 2014 & 2016 Archives of TGIF 2 Minutes comes a timely message – updated for 2021, as markets could get fairly rocky (read: volatile) with inflation fears, unprecedented US government debt issuance and money printing. Caution is warranted. However, timeframe and a PLAN are key.

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?”
I stress to my clients and friends: Do NOT allow short-term market moves to instill fear and lead to poor decisions.

Although I stress to clients and friends NOT to listen to the media’s Talking Heads amidst dramatic market moves — and then make rash investment decisions – we are human! It is nearly impossible to ignore what is going on daily in the news and markets. The stock markets dipped down a bit over the past days and weeks with frequent moves back up too. (Note, in 2021, the vast differences in performance of big technology, large-cap value and small-cap stocks; hint: technology is a sizeable laggard.)

STILL, I stress to my clients and friends: Do NOT allow short-term market moves to instill fear and lead to poor decisions.

Below is an important checklist for why you may — and in most cases should – be able to stick to your current investment positioning, given you had a PLAN in the first place:

  1. Cash level – Is your level of cash sufficient for your CURRENT (3-6 months) bills?
  2. Do you still have your job? (as in, your income)
  3. Do you have your Emergency Fund intact? (6-12 months of emergency savings in case of a 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 established 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? *Please see below.
  9. Why are you investing in the first place? (See # 4 above) 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 or most 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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