By Paul Bullock
It’s safe to say we were all caught off guard at the beginning of 2020. Now, two years later, we’ve learned that we can’t predict much, especially the timing of economic stability or instability.
And, while this has certainly been a time of much anxiety and stress, we aren’t powerless. In the midst of negative economic data and other unwelcome headlines, here are four ways to help you take control and prepare your finances for whatever lies ahead.
1. Research > Reacting
This concept applies to many areas of life, but it’s extremely valuable to remember when it comes to your financial plans.
When the marketplace is behaving erratically, you—the investor—need to do the opposite. One of the worst mistakes you can make is to sell from a place of panic. That’s because acting emotionally can turn a temporary loss into a permanent one. Instead, you should review past performance patterns, re-center your thinking, and make level-headed decisions (often with the help of a trusted financial advisor).
History tends to repeat itself, and that’s certainly true when looking at the stock market. Major drops in the Dow are nothing new. In fact, it’s been rising and falling in record-setting fashion for nearly a century. Whether it’s a depression, recession, or pandemic, the economy has shown its ability to bounce back from even the hardest of times.
2. Stay in the Market
It’s normal to feel worried when you see your investment values fall during uncertain times, but the last thing you should do is pull out of the markets entirely. When you do this, you’re locking in the low value of your accounts instead of letting them rebound before you withdraw. Remember, your investments may lose market value, but you don’t lose any money unless you sell while the value is low.
Similarly, putting your money into a volatile market probably sounds like the last thing you want to do right now, but investing is not about timing the market, it’s about time in the market. Over time, consistent investing can lead to growth. It’s hard to see this when you’re looking at the short-term fluctuations, but you’ll be glad you did when you look back on your investments in the years to come.
3. Rebalance Your Portfolio if Necessary
While you shouldn’t panic sell, holding on to stock is not always the right answer either. Course corrections are sometimes needed, especially in the form of rebalancing.
When the markets take your money on a roller coaster, it’s not hard for your asset allocation to get out of whack. Let’s say your desired asset allocation is 70% stocks and 30% bonds (this will vary based on your age, goals, and risk tolerance), but as volatility continues, your allocation shifts to 80% stocks and 20% bonds. To rebalance your portfolio and keep your risk level stable, you’d have to sell some stocks and buy more bonds.
4. Talk to a Professional About Your Situation
Ultimately, to help allay your fears, it’s extremely beneficial to talk to someone who is an expert in the field and spends his or her days researching this type of information.
Further, depending on your age and financial circumstances, you might not feel that you have as much time to let the market bounce back. In this instance, it’s even more important to consult a professional to make sure the types of investments you have align with your risk tolerance and time horizon.
Are you interested in learning more about your options and ways you can help protect your money and succeed in any market environment? Schedule a no-obligation introductory meeting or reach out to me at paul@wellingtoninvestmentadvisors.com or by phone at (812) 333-0874. And, be sure to check out what some of our clients say about working with our team at Wellington Investment Advisors to learn more about how we can help you.
About Paul
Paul Bullock is CEO of Wellington Investment Advisors, an independent, boutique fiduciary firm serving pre-retirees and university faculty across Indiana. With over 32 years of financial experience, Paul is committed to building long-term relationships through thoughtful, personalized investment advice and guidance. He focuses on a disciplined tactical asset allocation approach to money management through a strong understanding of economic and market conditions and strives to build trust with clients by providing sound guidance. Paul understands the hard work his clients have put in to arrive at where they are today and wants to see them succeed in their goals for the future. Paul graduated from the University of Texas with an MBA, as well as a bachelor’s degree in finance, and has been dedicated to assisting clients with their financial needs ever since. When he is not working, Paul enjoys time with his family and is also an avid equestrian polo player who helps raise money for over 18 different charities through his playing. To learn more about Paul, connect with him on LinkedIn.
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