Scared of Bears?
S&P 500 is down close to 20% YTD, if it falls below 20% that officially signals a bear market. How are you feeling? Well, the answer to that question depends on who you are and what your situation is.
For instance, although I don’t like seeing my account balances go down, I understand this is an opportunity for people in my situation. I am young, have a long time horizon before I need the money, and can keep accumulating shares at lower and lower costs. If you’re like me, you should consider increasing investment contributions, if you can - and buy as often as you can. All while, making sure the account types (Roth IRA, Traditional 401(k), taxable brokerage, etc) you purchase these stocks in align with your short- and long-term goals. If this seems like your situation, stop reading now and call me if you need help with the last sentence. The rest of the reading won’t apply to you.
However, there are many of you that are not in that situation. Some of you are nearing retirement and might feel worried. It’s natural to feel this way, you are losing money - for some, you’re seeing your nest egg that you’ve worked so hard to build up decrease with the stock market decline. Being close to retirement can add a feeling of anxiety because, as we all know, it’s not good to sell shares while they’re down, but you’re going to need to sell something to be able to live how you want in retirement.
So what can you do if you’re in this situation?
Well, it starts by having a detailed financial plan, not just a quick calculator that shows potentially how much money you could withdraw. A detailed financial plan is something that can show you the real, tangible possibilities that your financial life holds given this market downturn and your situation. I know this helps our clients because we have had just a handful of concerned client calls over this period of market decline. Knowing the most probable outcomes can allow you to take a step back, change goals if needed, and make adjustments going forward that will help your situation in the long run. Or, it might provide you financial confidence to realize that you do have enough - even with this downturn - and your worry has been brought on by watching too much CNBC.
After you have planned out what you want and what you need, it’s good practice to have an income plan for retirement, have your next 5 years of income need planned for and held in safe assets, either CD’s or bonds with durations that match your time horizon. While these assets don’t offer much in terms of returns, it can be very calming in times like these to sit down and look at your portfolio and say “I’ve got my next 5 years covered, I’ve got time to wait for this market to turn around without having to sell shares when they’re down”.
By far, the most important thing to do in situations like these is to remain calm. Don’t make any drastic moves without consulting a professional first. Don’t liquidate your entire 401(k) and move to cash on your own. Don’t take actions that might have consequences you aren’t prepared for that are based on your current emotional state. It can be easy to think the world is falling apart and all your money will disappear, but there is an extremely high probability that it won’t happen. Keep your head on straight, seek professional help if it gets too much for you, and take a break.
Always, but especially in times like these, it’s important to remember what this money is truly meant for, do things that bring you joy. Spend time with family, remove yourself from your money for a little bit, and realize that it’s not the end of the world. The most important thing is that you have a plan, and that plan incorporates times like these and strategies for navigating them. If you need help with that, schedule a meeting. We’d love to help show you what’s possible and to answer any questions you might have.
Will
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
Stock investing includes risks, including fluctuating prices and loss of principal.