Do media headlines have you down on the stock market?
“Down plunges 1,175 – worst point decline in history” – CNN Money Headline February 5, 2018
Are you checking your 401(k) every day? STOP! Don’t do it to yourself. A month before the CNN headline on January 4th was “Dow races to 25,000 for the first time” It is easy to get caught up in the media hype, because the media knows how to keep your eyeballs pinned to their station. Remember, they are incentivized to have people watching them, so the more drama, the better for their ratings.
The stock market has cycles, it goes up (which we all enjoy) but it also goes down. This drop of 1,175 points in the DOW is less than a 5% drop. Keep in mind a correction is when the stock market is down 10% from its most recent high. Ride the waves of the market and look at these opportunities for what they are – a chance to buy stock on sale for your long term financial goals!
I’m not suggesting you don’t pay attention at all, as you approach retirement you need to be strategic in your investments and planning. Shifting from portfolio heavily weighted in stocks to more conservative investments is prudent. Prepare for what you will need by when you will need it. If you will have a need for income in the next two years, those funds should not be in the stock market. Notice I didn’t say not invested, I said not in the stock market. There are other types of investments; government bonds, corporate bonds, etc. History shows the stock market will continue to grow and what drops will, eventually, come back, you just don’t want to be forced to sell at the wrong time because you didn’t keep enough money safe.
Want to take advantage of the stock market sale but nervous about jumping in when the market has been fluctuating? Consider dollar cost averaging, investing a fixed amount on a regular basis. Your fixed amount will buy more shares when the markets are lower, a fewer shares when the market is higher. You are probably doing this and didn’t even know it –if you are taking money from your paycheck and putting it in a retirement account you are already investing over time.
This may also be an opportunity to rebalance. Skim off the top of your gains and reposition for the future growth of other assets. Sometimes this is hard for people to do but ultimately it is the healthiest choice for their portfolio. Call your financial professional and take a look at your accounts.
Stock market downturns and the media hype can distract you from your long term goals. Keep your eye on the prize and be thoughtful and strategic.