What Should You Do When the Market Takes a Tumble?
Spoiler Alert: Stay invested!
Investing can be stressful. The marketing can rise and fall daily, sometimes understandably and sometimes unexpectedly. This often causes investors to panic and act irrationally, making decisions based on fear and not facts.
This is especially true when investors are retired or approaching their retirement. They see their “short window” closing and they get nervous. Although it may be difficult, it is in these moments that you need to stay calm and focused.
As you can see in the chart below, if you missed out on the 10 best days in a 20-year period (that’s only 10 of 7,305 days! Or only 0.13% of the time!), it would have cost you about half of your return in the S&P 500. And missing the 30 best days leaves you with a negative return!
The reality is, you can’t tell how the market is going to perform tomorrow, or even an hour before the final bell. If today is a bad day, it doesn’t mean tomorrow will be as well. Why would you sell after the market has gone down and you have already incurred the loss?
The market comes back from drops and lows. Within five years of every major stock market decline since 1987, the market has rebounded between 10% and 90%. In most cases, the market was back in positive territory within just three years.
It is during these times of market volatility and uncertainty have you realize the need to be confident in your financial plan. An individual’s investment time horizon has many variables: your life expectancy, your spouse and his/her needs, other dependents, family needs/responsibilities, medical concerns, fun retirement plans, and even creating a legacy if you are fortunate to have experienced great wealth. Having a responsive and comprehensive financial plan can ensure these goals are met. It can help you create an attainable “bucket list” instead of a fingers-crossed “wish list”.
At Hibernian, we believe in investing for the long run. We work with clients to create a financial plan that meets their immediate and long-term needs, one that can adapt as their life and life plans change. We want our client to have confidence in their financial future and in their financial plans. A disciplined approach is key when confronted with changes to the market.