As Stock Market Fluctuates, It’s Important to Think Long-Term

The stock market volatility experienced this month is creating concern among investors that a market downturn may be more than just a correction. On October 24, the sell-off on Wall Street knocked the Dow Jones down more than 600 points, wiping out the gains for the year for the blue-chip average and the broad Standard & Poor’s 500 index. On October 10th, 2018, the Dow dropped 830+ points. These market drops were large, swift, unexpected and certainly large enough to garner front-page headlines and get everyone’s attention.

Will this volatility be significant and prolonged? Many economists believe that growth will start to slow next year as the effects of last year’s sweeping tax cuts and increased government spending start to subside. This type of prediction can often lead to an overreaction from the investment community. As a consumer, we need to remain level-headed and think long-term when it comes to retirement planning. Below are a few things to remember:

  1. Having an Investment Plan is Important – It is impossible to succeed in any endeavor without a plan and investing is no different. A plan will focus on your long-term objectives and put you in the best position to achieve them. Emphasis is rightfully on the “long-term” as opposed to the “short-term”. The short-term is the domain of pundits, talking heads and snake-oil salesman. It is also what gets your attention when you turn on the television and therefore also what sells advertising. So take it all with a big grain of salt.
  2. Having a Personal Financial Plan is Important – Benjamin Franklin is credited with saying that “Failing to plan is planning to fail”.  One of the very first steps you should take is develop a personal financial plan which takes into account your goals, objectives, risk tolerance, needs and wants.  This plan is critical in helping determine the risk you need or are willing to take in order to achieve your long-term goals.  It is a “living document” and one that should be updated on a regular basis to make sure that you are on track to achieve your long-term goals. Just as with the investment plan, each plan is a critical step in mapping out your financial future.  With a financial plan, it is easier to make financial decisions, avoid emotional reactions and stay on track to meet your goals.
  3. Diversification is Important – Simply put, the reason all of your portfolios are diversified is largely because no one can predict the future.  An important part of diversification is that your portfolios have a mix of equities and bonds.  Bonds are boring but they act as a shock-absorber during times like this.  Even though bonds move up and down in price like other assets, they are a lot less volatile than stocks and serve to reduce the amount of downward movement in every portfolio.
  4. Patience is Important – Reacting to short-term noise and volatility has been proven to be very harmful to your financial health.  Yes, there is a time to be defensive in the markets, but these decisions should only be made after carefully observing economic and market indicators for some time.  At this point, the evidence points to the fact that we are experiencing a “normal” market correction, even if it hardly feels that way.

These four simple and easy-to-follow steps should help with retirement planning during any economically harsh climate. We can’t control the stock market but we can certainly get a tight grip on our finances to avoid financial depression. As the economist and academic, Robert J. Shiller, says, “Finance is not merely about making money. It’s about achieving our deep goals and protecting the fruits of our labor. It’s about stewardship and, therefore, about achieving the good society.” With the help of a financial advisor, we can set our minds to think in long-term financial steps, regardless of the state of the stock market, that can lead us towards a much more successful future with added wealth and value.

Add Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

The 20 Most Notable NYU Alumni in the Business World
Greg Norman: From Athlete to Successful Entrepreneur
The 20 Richest Companies in the World in 2019
Meet Brex Co-Founders Pedro Franceschi and Henrique Dubugras
7 Subscriptions That Could Be Wrecking Your Budget
Five Coal Stocks That are Still a Buy in 2019
Giving Your Child The Best Chance to Be a Good Investor
Green Bonds Now In Focus for ESG Portfolios
Is The Future of Reading in Gamifying Books?
The Financial Services Industry Receives an F in Preparation for Technology Disruption
What is the PCI Security Council and How Does it Affect Businesses?
Mining Cryptocurrencies and the Influx of GPUs
Eight Great New Travel Items to Ease You Down the Road
Find Solace at Solaz: Cabo’s Newest Luxury Retreat
MSC Cruises Goes Ultra Luxury Targeting High Net Worth Travelers
The 20 Best Dog-Friendly Beaches in Europe
The History and Evolution of the Bugatti Chiron
The History and Evolution of the Porsche Cayman
20 Electric Cars We Can’t Wait To See in 2020
Ranking the 10 Top Lexus SUVs of All Time
The History and Evolution of The Breitling SuperOcean
A Closer Look at the Nomos Club Sport Neomatik 42 mm
A Closer Look at the Ressence Type 5 Night Blue Watch
A Closer Look at the Greubel Forsey Quadruple Tourbillon GMT