Editor’s Note: “Dollars and Sense” is a new column in the Sun Lakes Splash dedicated to financial issues. This column is designed to provide accurate and authoritative information on the subject of personal finances. The publisher shall not be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential or other damages. As each individual situation is unique, questions relevant to personal finances and specific to the individual should be addressed to an appropriate professional to ensure that the situation has been carefully and appropriately evaluated. Robson Publishing, a division of Robson Communities Inc., is not liable for information contained in these articles.
Key ways to calm your fears when the stock market is scary
Know what you own and why
When the market goes off the tracks, knowing why you originally made a specific investment can help you evaluate whether your reasons still hold, regardless of what the overall market is doing. Understanding how a specific holding fits in your portfolio also can help you consider whether a lower price might actually represent a buying opportunity. Also, if you don’t understand why a security is in your portfolio, find out. That knowledge can be particularly important when the market goes south.
Use cash to help manage your mindset
Cash can be the financial equivalent of taking deep breaths to relax. It can enhance your ability to make thoughtful decisions instead of impulsive ones. If you’ve established an appropriate asset allocation, you should have resources on hand to prevent having to sell stocks to meet ordinary expenses. Having a cash cushion can change your perspective on market volatility. Knowing that you’re positioned to take advantage of a downturn by picking up bargains may increase your ability to be patient.
Tell yourself that this too shall pass
The financial markets are historically cyclical. You may wish you had sold at what turned out to be a market peak, or regret having sat out a buying opportunity and you may well get another chance at some point. If you’re considering changes, a volatile market can be an inopportune time to turn your portfolio inside out. A well-thought-out asset allocation is still the basis of good investment planning.
Look in the rear-view mirror
If you’re investing long-term, it helps to take a look back and see how far you’ve come. If your portfolio is down this year, it can be easy to forget any progress you may already have made over the years. Though past performance is no guarantee of future returns, the stock market’s long-term direction has historically been up. With stocks, it’s important to remember that having an investing strategy is only half the battle; the other half is being able to stick to it. Even if you’re able to avoid losses by being out of the market, will you know when to get back in? If patience has helped you build a nest egg, it just might be useful now, too.
About WealthTrust – Arizona
WealthTrust – Arizona is a fee based investment advisory firm that specializes in integrating portfolio management with estate planning for high net worth individuals and families. The professionals at WealthTrust – Arizona are frequently sought out by the national media such as The Wall Street Journal, Forbes, New York Times, CNBC, BloombergRadio, and others to share their thoughts on matters that impact our clients.
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