There’s no getting around it, the DJIA is not off to the best start for 2022. In fact, according to MarketWatch.com we are down 5.7% YTD as of January 21. Market jitters and corrections can be unsettling for all of us. We can’t control the ups and downs of the investment markets, but we can do a few things to alleviate the feelings of frustration and helplessness. Start by taking a breath, put your thinking cap on, envision the future, and if you need to, call your financial planner for a chat. Here are a few tips to keep things in perspective and get you through an erratic market.
First, ignore the media hype – keep in mind that hype sells. It’s all about eyeballs and impressions these days. Wild headlines about market gyrations sell stories and give talking heads something on which to opine.
Second, do nothing! That’s right, nothing. If you have a solid financial plan and have been keeping an eye on your asset allocation, you likely need to do nothing. You and your financial planner should already be monitoring your plan and asset allocation on an on-going basis. If you need reassurance, give your planner a call, send a text or an email and talk to them about how you are feeling. Your financial planner most likely feels what you feel. After all, they are also likely invested in the markets and their own retirement and savings are affected to some degree.
Third, check with your financial planner and see if the market downturn is a good time to buy. Chances are it is. A correction can be a good time to add to your diversification if you have the funds available. Do not buy a stock, bond, or fund just because it dropped in price; work with your planner to make sure it fits into your overall investment plan and goals.
Next, if you are older and approaching retirement, you and your financial planner should have already planned your allocation long before your retirement. Make sure you have appropriate cash holdings, fixed-income, and equities that match your retirement goal.
Finally, relax! If you need reassurance, call me and we can talk it through. You have not lost anything unless you panic sell and lock in that loss. It’s true that there is no way of knowing how long a downturn or sideways market will last. But it is true that we have more than one hundred years of market history to look back on, and we have had multiple corrections but have always had more up years than down years.
Keep in mind that time and volatility work to your advantage when it comes to long-term financial planning and investing, so stay the course! As mentioned, a downturn may be a great time to add to your holdings. Consider upping your 401(k) contribution, putting more money into your IRA, or even adding to funds you already hold. A considerable run-up in the market may be the perfect opportunity to take some profit and build on your cash position or fixed-income allocation. Your adviser can hold your hand and walk you through these market changes and be a sounding board for your concerns. A good financial planner will also remind you of your goals and timeline and why the day-to-day changes of the market shouldn’t affect your long-term plan.
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