When markets drop: take deep breaths, and don’t do anything

8 years ago 0 1017

Given the recent increase in market volatility, the article below may be a helpful read. As a WealthStep client or follower, you may have heard these timeless ideas before in our letters, webinars, and blog / Facebook / Twitter posts (follow us to get helpful thoughts and reminders!).

http://www.nytimes.com/2015/08/22/your-money/stocks-and-bonds/advice-after-stock-market-drop-take-some-deep-breaths-and-dont-do-a-thing.html?smprod=nytcore-ipad&smid=nytcore-ipad-share&_r=0

“Market corrections” are a common and periodic occurrence after a period of rising investment values. If you’ve joined our Quarterly Context webinars, it isn’t news to you that market prices may have been a bit high after an extended bull market following the Global Financial Crisis. Markets have been partly fueled by low/stimulative interest rates, and when concerns arose about the less than transparent Chinese economy, and the implications for the global economy, uncertainty caused markets to pull back.

Such market adjustments are unpredictable in timing and length, and studies show that trying to guess the markets almost consistently fails vs. staying the course. For that reason, we help prepare for volatility long before it happens, by helping clients be informed about risks (including inflation, which can do much more damage in the long-run!), providing guidance to choose a portfolios that fits your life stage and risk tolerance, and rebalance portfolios to reduce excess risk.

If you have a portfolio that fits your life stage, and you still feel the urge to reduce your stock exposure (likely at the expense of your long-term goals), try going for a walk first to clear your head, and read the article above again.

This article is for informational and educational purposes. Any hyperlinks to third party websites are not endorsements and outside content is believed to be reliable but has not been independently verified. Consult an objective financial advisor for guidance as appropriate.