The stock market got “interesting” again this week. Volatility is back after having disappeared for the last year and a half. Volatility in the markets is normal and over the long-term, a 10 percent decline in the U.S. stock market happens once a year – on average.
This week I’ve been watching the financial media try to whip this up into something it’s likely not. I’m guessing it’s good for ratings as financial shows have seen a dramatic viewership decline in the last several years. Now, it’s way too early to start calling for bear markets, but you would think we are in the middle of one if you watch the financial news. And interestingly, each barking head has a different reason for what is happening, how can that be?…. but I digress.
The market is down a little over 10% from its all-time highs, after running up over 100% cumulatively, the last five years – with dividends reinvested. But I do understand the pain we feel from investment losses is twice the joy we get from gains.
So what should we do when the market goes down?
#1. Stick to your plan and remain focused on your long-term objectives.
If you do anything, it may be a good time to rebalance your portfolio back to your targeted asset allocation percentages.
#2. Don’t pay heed to the pundits, they are looking to stir controversy or sell something or both and don’t obsess about the market value of your investments.
We are inherently irrational when it comes to investments, it may be wise to talk to your financial advisor or planner to discuss or revisit short and long-term expectations.
No one knows whether this correction will be short-lived or turn into a long, drawn-out affair. No one can predict how investors will react given the hundreds of variables that shape global market returns daily. But if you have a plan of attack or have put one in place working with your advisor, you sidestep the emotional flight response and hopefully will look back on this another behavioral vulnerability overcome.
CBlakely, CFP®, CTFA 02-2018