Don’t Be “Chicken Little” - The Sky May Not be Falling
When the financial markets become volatile, it might seem, as a knee-jerk reaction, that getting out of the market might be the right thing to do. It is not unusual for the media to use words like “crashing”, “tumbling”, “tanking” to describe the markets and that can cause investors to be concerned. Conversations around the water cooler at work can add to the angst. It’s when investors have emotional reactions that they need to keep things in perspective and call a financial advisor to discuss a number of factors, including but not necessarily limited to:
- What is your tolerance for risk? (How comfortable are you remaining in the market? Is this your only money or a percentage of much larger assets? Are you conservative or speculative?)
- What is your time horizon for this money? (For example, I am going to use it in 20 years for my retirement is a longer time horizon than I am going to use it to retire next year).
- What sectors in the market are being affected? Do you own investments in those sectors? How are your investments allocated?
- What else is happening in the economy? Are other indicators strong such as employment or Gross Domestic Product (GDP)? What are economists projecting?
- Are there strategies that might assist you in mitigating your exposure to risk?
- What does the research department have to say? Your financial advisor may have information to share with you. For example, on our website www.capitalfinancialplanning.net you can see weekly, monthly, quarterly, and yearly research reports synched from LPL Financial research department under the LPL tab. We share updates from LPL’s research department weekly on LinkedIN as well. Be informed and educated about the whole picture of the markets and economy.
- While past performance does not guarantee future results, has it been historically common for markets to see some volatility at that time of year?
It is not unusual for markets to have periods of correction, particularly if they have been moving in one direction for a long time. There are many factors which help determine stock and bond prices. If you are having discomfort over anything you see or hear, have a conversation with your financial advisor, who may help you to navigate choppier waters. Providing education and helping you to determine what is suitable for your circumstances is part of the job of a financial advisor.
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The opinions expressed are solely those of the author. Seek advice from a qualified professional before taking any action concerning your finances.
Todd A. Slingerland, CFP®
6 Tower Place Albany, NY 12203 (518) 867-4000 x105 firstname.lastname@example.org