If you're an investor, you may have been disappointed with how the markets have been reacting this summer to the news of high oil prices and other short-term events.
Nonetheless, your long-term financial goals don't have to be jeopardized by these losses, if you know how to respond to them. Here are a few moves to consider:
• Stick to your investment strategy. It's almost always a bad idea to make long-term investment decisions in response to short-term market fluctuations. If you have built a diversified portfolio of quality investments, you're better off just staying the course during a market decline. If these investments were suitable for you before the market drop, they will still be appropriate when the market turns around.
• Don't try to time the market. It would be great if you could know when the market had reached its low or high points or which days would be losers and which ones winners. If you had that foresight, you could always jump in and jump out of the market at the right times. Unfortunately, no one can make those predictions with any accuracy. People who do try to time the market in this manner end up jumping out at the wrong times and missing both short- and long-term market rallies.
• Look for buying opportunities. By definition, a market decline means that stock prices are lower, which means you may find some good buying opportunities. Of course, you'll want to know if the stock's price is low because of the effects of the broad-based market decline or because of other factors specific to the stock, such as poor management, non-competitive products or a decline in the industry that it belongs to.
While making these moves can help you get past the market decline, it doesn't mean that a severe price drop can't affect you. If you need money to pay for an unexpected cost, such as a major car repair, you'll likely take a hit if you have to sell stocks when the market has fallen substantially.
You can avoid this problem by putting three to six months worth of living expenses in an emergency fund, preferably in a cash or cash equivalent account.
Nobody likes to see big declines in the stock market. But if you're a long-term investor with an emergency fund and a rebalanced portfolio to fit your risk tolerance, you will be in a much better position to withstand these market drops and well prepared for an eventual recovery.
For more information, call (760) 730-9588 or e-mail Justin Peek at [email protected].
Nonetheless, your long-term financial goals don't have to be jeopardized by these losses, if you know how to respond to them. Here are a few moves to consider:
• Stick to your investment strategy. It's almost always a bad idea to make long-term investment decisions in response to short-term market fluctuations. If you have built a diversified portfolio of quality investments, you're better off just staying the course during a market decline. If these investments were suitable for you before the market drop, they will still be appropriate when the market turns around.
• Don't try to time the market. It would be great if you could know when the market had reached its low or high points or which days would be losers and which ones winners. If you had that foresight, you could always jump in and jump out of the market at the right times. Unfortunately, no one can make those predictions with any accuracy. People who do try to time the market in this manner end up jumping out at the wrong times and missing both short- and long-term market rallies.
• Look for buying opportunities. By definition, a market decline means that stock prices are lower, which means you may find some good buying opportunities. Of course, you'll want to know if the stock's price is low because of the effects of the broad-based market decline or because of other factors specific to the stock, such as poor management, non-competitive products or a decline in the industry that it belongs to.
While making these moves can help you get past the market decline, it doesn't mean that a severe price drop can't affect you. If you need money to pay for an unexpected cost, such as a major car repair, you'll likely take a hit if you have to sell stocks when the market has fallen substantially.
You can avoid this problem by putting three to six months worth of living expenses in an emergency fund, preferably in a cash or cash equivalent account.
Nobody likes to see big declines in the stock market. But if you're a long-term investor with an emergency fund and a rebalanced portfolio to fit your risk tolerance, you will be in a much better position to withstand these market drops and well prepared for an eventual recovery.
For more information, call (760) 730-9588 or e-mail Justin Peek at [email protected].