Many of us enjoy going to the amusement park and riding the gut shaker roller coaster that races to its highest point and then suddenly goes hurtling some 360 feet down the track at 90 miles an hour. However, riding out the stock market’s ups and downs can be a very different experience. Those are the times of market volatility and if you’re not prepared for them, they can be extremely unsettling.
Conventional wisdom tells us that what goes up must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when your money is at stake.
So when the markets spike, dive or slide, ask yourself:
What’s my time horizon? In other words, when will you need the money? The general rule is the longer your time horizon you should be able to ride out the market fluctuations. Keep your eyes on your long-term vesting goals of five years of more. On the other hand, if your time horizon is short, you may want to concentrate your investments where there is little or no volatility because you may not have enough time to recoup losses, should they occur.
What’s my risk tolerance? This question addresses how you feel about the potential of loosing your hard-earned money. Many investors would forgo the possibility of a large gain if they knew there was also the possibility of a large loss. For this type of investor they may want to think about putting their money into less risky investments, such as treasury bills, money markets accounts and high quality bonds with short term maturities, as opposed to the riskier investor who invests in stocks, real estate and higher-yielding investments. However, there is absolutely no way to guarantee that you’ll never lose money.
If you’re worried, there’s no reason why you shouldn’t call a financial planner to calm your nerves and confirm what you’re doing. If you’ve never talked to a planner before, now might be a good time to start.
Securities offered through Associated Securities Corp. (ASC), member FINRA/SIPC. Advisory services offered through Associated Planners Investment Advisory, Inc (APIA), ASC, David S. Reinders, CFP, Inc., Registered Investment Advisors. David S. Reinders, CFP, Inc. is not affiliated with ASC or APIA. We are located at 25129 The Old Road, Suite 105 in Stevenson Ranch.
For more information contact Rebecca Robins, CPA/PFS, CFP™, CA Insurance Lic#0D75745 at 661-222-2331.