The stock markets have experienced significant declines in recent weeks. It's a rapid market "correction" (down -10% or more off of recent highs) that could become a "bear market" (-20% or more), and the downward trend has been spotted with some sharp upturns also. This is a big dose of market volatility. It's also a normal, if infrequent, part of the long-term market cycle. And the markets have always recovered. I can't promise when or how fast, but I am confident this is a bump in the road (maybe a big one) and not the end of the road.
Now, what should investors be doing?
First and foremost, if you can't afford to lose money, get out of stocks now. Even if already down, folks who can't afford to lose money really do need to cut their losses and avoid further risk. This applies to only some investors--most investors have some tolerance for stock market risk. If you're not sure, let's talk ASAP and figure it out. I'll help you earn at least some safe and sound interest if you really do need to go to the sidelines.
However, for most investors and clients of my firm, staying the course in a properly diversified portfolio is the right choice. The right mix of stocks, bonds, and cash create a diversified portfolio with a risk profile suitable to each investor. Whether one is conservative, moderate, or aggressive, I'll help you determine the right "asset allocation". That is the most important thing I do for each client. When one is properly diversified, the long-term approach is almost always better than trying to "time the market".
Please contact me with any questions, and if you have friends or loved ones who need investment or financial advice you're welcome to send them my way for a consultation.
Here are a few ballpark Asset Allocation examples:
- 20% stocks/80% bonds and cash = Conservative
- 40% stocks = Moderately Conservative
- 60% stocks = Moderate
- 80% stocks = Moderately Aggressive
- 90%+ stocks = Aggressive
And here is some perspective in the form of a 20-year chart of the Dow Jones Industrial Average: