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Last April, I posted an entry on our blog called “What Should I do to Survive a Market Drop?,” I reminded readers that a significant correction was past due and I encouraged you to update your strategies in anticipation of a correction or worse. That was posted about a month before the market peaked in May of last year and markets have been generally down since.
The news has been filled with stories about stocks dropping, junk bond prices falling, trouble with the Chinese economy, oil prices imploding and terrorism on the rise. All the talk is about how any or all of these risk factors are going to impact the stock market negatively. Then you read all the stories about how you should stay the course, don’t sell, and just stay invested as this too will pass.
So do you stay put or sell your stocks? Have you thought about what I asked last year? How do you plan to survive if the stock market falls?
When you think about your investment accounts, are you anxious? Feeling stressed? Are you having trouble sleeping at night? Have you resigned yourself to postponing retirement? Wealth should help you sleep better at night; not keep you awake.
Is Now the Right Time to Invest in the Stock and Bond Markets?
- Do You Have a Strategy? All too often when I ask new clients why they own a stock, mutual fund, bond, etc.; they look at me with a blank stare. When you are building your portfolio, failure to have a strategy can lead to big losses. There is an old saying, “Limit your losses and let your winners run.” Now that isn’t much of a strategy, but it is more than most folks have in place. In my 30 years in financial services I have only heard one person talk about when to sell. Most companies have a limited life span, so the old buy and forget it is more likely to lose your money than make it. If you remember forever stocks like Golden West Financial and People Express, which were parts of the cutting edge, high flying “Nifty Fifty” stocks from the 70’s you will know what I mean. Not having the framework for decision is a recipe for increasing your risk!
- When’s the Last Time You Reviewed Your Investments? Over the past few months I have had a number of people brag to me that they haven’t looked at their accounts in months and even years! Successful stock investors review their portfolio on a regular basis. They ask this question while doing that; “Would I buy this today?” If the answer is no, then sell it!
- How Will You Spend Your Investments? If you are looking to spend the money in the next few years, that money should not be in the market, even a roaring bull market! If you are going to buy a car, home or other major purchase, send your kid to college or private school or have any plan to spend the money, it doesn’t belong at risk. These are usually important purchases, so you want to make sure you have the cash available and not be forced to sell when the market is down. According to a recent study done by Prudential called “The Retirement Red Zone”, the most critical time in regard to creating retirement financial security is the 5 years before and the 5 years after retiring. During this period, it is imperative not to lose money! Losses during this period will greatly reduce the probability of having your money last your lifetime.
I would like you to consider the following: Winning is really about not losing!
Successful traders, gamblers and investors all learn this critical lesson. As Kenney Rogers said in the song; “Know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to run!” There are lots of alternatives to stocks and bonds; you just need to know where to look. If you are fed up with the volatility, if you want to review your current investments, or are just ready to look at other options, contact us; we can set up a time to discuss alternatives.
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