Should I Be Worried About the Stock Market Drop?

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Things to consider going forward

Last week, the Dow Jones Industrial average was down over 650 points. Yesterday it dropped over 500 more points and was down more than 1000 at one point, and the other market indexes were losing even more ground. Today it was up over 300 points and finally closed down more than 200. If you ever wondered about the term “the Wall Street roller coaster”, you are experiencing it these past couple of weeks!

You might be wondering at this point if it will get worse before it gets better. Given the global issues that everyone seems to be pointing to; China, Greece, the Iran nuclear deal, collapsing oil prices, election uncertainty, (and the list goes on and on), it is only natural to be concerned. After all, if things keep on in this direction, memories of 2007-2009 will be refreshed in your mind. Back then, the market selling spilled over into many other markets from real estate, to mortgages, to employment, bad news seemed to be everywhere. We want it to be better this time, but will it?

If you have turned on the television or radio, or read a newspaper over the last few days, the “experts” seem to be offering the same advice; “Stay the course, no need to panic”. They say that, as long as you have a plan, you should stick to it and not sell or change. In fact, the closest advice I heard to taking action was to rebalance your portfolio based on your original asset allocation model. As if that was going to replace the money you lost in the last week.

While staying the course, doing nothing and rebalancing may all be good ideas for some investors at this time, I think the more important question is “How are you feeling about your investments today?” Was last weekend filled with anxiety for you? Did you have any trouble sleeping? Do you feel overwhelmed, confused or otherwise stressed over the markets?

Some of you might remember last October, when this same type of “correction” occurred. Back then I wrote a piece called “Is it Time for You to Sell Your Stocks?”. In that post, I provide 8 questions for you to answer that will help you decide if you should be selling.

The best thing you can do now is to answer those questions. I believe that people should be selecting investments that suit them both emotionally and financially. For the last 6 years, the market has risen nearly non-stop. As a result, there seems to be a complacency that has taken over most people’s attitudes. It has always been amazing to me how a period like this will make the majority forget that the markets go in both directions.

We sometimes forget that there are a lot of options out there for us to invest in. There are many strategies available that are not tied to stocks or other volatile investments. I would encourage you to take advantage of this period and use it to reassess where you are at financially in your life. Then you can make clear, effective rational decisions and avoid the knee jerk, emotional and frequently damaging decisions that prevent the majority of investors engage in over and over.

This is a great opportunity for you to “take stock” of your stocks. It could be time for a new approach, or it may also be a great time to look at alternatives to stocks and bonds. If you are not sure what kinds of choices might be available, give us a call or send an email and we can talk about options that may be just what you are seeking.
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