So Now What?
I have spoken directly with many clients over the past week or so about the recent stock market volatility. Although it is to be expected from time to time, it can be very difficult to stand by and watch the market drop the way it has recently and not want to take action --sometimes drastic action, like selling a large portion of your stock portfolio in an attempt to reduce your risk. But I assure you this is not a time to panic. That’s not to say we should do nothing and just hope for the best. Here are a few things we can do to reassure ourselves that we are on the right track for the long term and possibly even benefit from a market downdraft:
1. Don't Stress or panic - in fact, rejoice that there is a sale.
2. Harvest tax losses and upgrade your portfolio with the proceeds
3. Put money to work dispassionately - if you have money to invest, sell-offs are your friend - let the other guy panic and sell 5% of his portfolio. In fact, if you have been considering increasing your retirement contribution, now is a great time to do it
4. Review your long term plan – We do this at least once a year, sometimes more often as life changes occur. Recognize that making large changes to your allocation in the near term can have a significant negative impact on your plan outcome. Remember we use a long term growth rate that accommodates short term fluctuations like the one we are seeing now.
5. Review your asset allocation and cash reserves - if you have sufficient cash reserves for short/medium term expenses, consider investing some of the excess as the market rebounds to get you back up faster. If you need to generate some additional cash, make sure you do it in a way that will maintain your target allocation, and provide the kind of return you need to make your plan work.
Hopefully by now most of you have heard this kind of information from me before and don’t feel too uneasy about recent market conditions. But if you are feeling nervous about your financial resources, losing sleep thinking about what the stock market will do tomorrow… or the next day, please call me.
1. Don't Stress or panic - in fact, rejoice that there is a sale.
2. Harvest tax losses and upgrade your portfolio with the proceeds
3. Put money to work dispassionately - if you have money to invest, sell-offs are your friend - let the other guy panic and sell 5% of his portfolio. In fact, if you have been considering increasing your retirement contribution, now is a great time to do it
4. Review your long term plan – We do this at least once a year, sometimes more often as life changes occur. Recognize that making large changes to your allocation in the near term can have a significant negative impact on your plan outcome. Remember we use a long term growth rate that accommodates short term fluctuations like the one we are seeing now.
5. Review your asset allocation and cash reserves - if you have sufficient cash reserves for short/medium term expenses, consider investing some of the excess as the market rebounds to get you back up faster. If you need to generate some additional cash, make sure you do it in a way that will maintain your target allocation, and provide the kind of return you need to make your plan work.
Hopefully by now most of you have heard this kind of information from me before and don’t feel too uneasy about recent market conditions. But if you are feeling nervous about your financial resources, losing sleep thinking about what the stock market will do tomorrow… or the next day, please call me.