The stock market hates uncertainty and it does not take much to get the roller coaster heading down hill. China’s impact on the global economy is the most recent source of uncertainty. How should you respond if a significant percentage of your assets are invested in the stock market?
Is this a market correction, less than 15% downturn that lasts less than six months, or the beginning of general market decline that is more than 15% and lasts longer than six months? Truth be told, no one knows the answer to this question. So what is your next, best step? We have a few tips that can help you make the right decision.
Do not make emotion-backed decisions that are based on fear of the unknown. A downturn was inevitable after six years of positive market returns. All the market needed was enough uncertainty (China, Greece, Oil, Fed Policy) to decline in value. You have three alternatives:
- Stay invested and ride-out the downturn
- Sell to reduce your exposure to common stocks
- Get out of the stock market
Your Investment Horizon
If you are accumulating assets for retirement in 2025 you are in a great position to ride-out a general market decline in 2015. Markets go up and down, but the peaks always get higher over time or no one would invest in the stock market.
Do not make financial decisions that are based on headlines that are written to trigger emotions. The media uses aggressive headlines to get you to read their stories. They need readership to sell advertising. Members of the media are not investment experts so you should not make decisions that are based on their opinions.
Self-purported experts will eventually be right if they predict stock market declines long enough. The last major decline was 2008. So they have been wrong for the past six years. The current market correction does make them experts. It is inevitable that markets go up and down. Do not select advisors based on undocumented claims that they can time future market performance. No one has a crystal ball that can predict the top of a rising market or the bottom of a falling market. Market timing is a deceptive sales tactic.
Your Financial Advisor
75% of financial advisors are really salesmen who masquerade as advisors when they sell investment and insurance products. These “advisors” are paid at the time of the sale so they have no incentive to meet with clients during down markets. If your advisor disappears, there is a good chance he is a salesman.
This may a good opportunity to upgrade the quality of your financial advisor. Visit www.PaladinRegistry.com to learn more.