Unprecedented events in the history of the U.S. economy have taken place in the past few months. We have witnessed the biggest bank failure in American history, a drying up of the credit markets, the Dow swings of nearly 800 points to the downside and upside swings of more than 600. With these events it’s easy to succumb to the urge to panic in an economic crisis.
The litany of bad news may entice you to make big changes to your investment portfolio. Some people sell fearing worse losses. But sudden action is usually a mistake. Changing your focus now could cost more than you think. Before taking any moves, you may want to consider the following points:
1. Focus on the long-term – Are you retiring today? Is tuition due next week for your child’s education? Now is the time to review and reaffirm your financial goals. Your time horizon and goals are two of the most important factors in determining how you should be investing.
2. Missing the upside potential – As you are aware, market drops can be steep and quick. But so can markets on the rise. Some of the largest market gains in history occurred over the course of a single day. Investors who sell on the drops can miss out on future upside gains.
3. Locking in losses – By selling off investments after a market drop, you are locking in those losses. Historically, patient investors have been rewarded by long-term performance of the stock market.
4. Sitting on cash – Investors who cashed out now face another dilemma – when to get back in the market. Waiting on the sidelines trying to predict when the market will hit bottom has proved to be an ineffective and inexact science.
It is important to consult your financial advisor before making any hasty decisions that you may regret later. Your advisor may be able to help you avoid potential and costly mistakes.
*Past performance is no guarantee of future results.
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.
For more information contact Rebecca Robins, CPA/PFS, CFP®, CA Insurance Lic#0D75745, at 661-222-2331. Located at 25129 The Old Road, Suite 105 in Stevenson Ranch.