For now, I plan to continue making monthly investments into my accounts as I have been in the past. Here's why.
Pulling my money out now could have worse consequences
"The stock market rewards long-term investors who have patience." Although this is something I've always known, it helps to hear those words coming from Mark J. Feldman, Certified Financial Planner and wealth management adviser with Bleakley Financial Group (and my own personal financial planner).
Since I don't plan to retire for at least another 30 years, losing some money today shouldn't make a big long-term difference in my overall retirement goals. Plus, "no one can accurately predict exactly which days the market will go up, and which days it will go down," said Feldman. "If you are out of the market for just a handful of the up days, your portfolio will suffer dramatically over the long term."
The market is expected to have down years
Although the coronavirus is scary and new to us in so many ways, the impact that it's having on the market actually isn't all that extraordinary.
"There are so many examples throughout history of unique events that had extremely disruptive impacts on the market, and we have recovered from each and every one of them only to see the markets correct and grow dramatically," said Feldman.
If you pay attention to every dip in the market and react accordingly, you will never find a good time to invest your money, and it will never reap the full benefits of being in the market for the long haul.
I have a diversified portfolio that can handle the changes
Regardless of age, it makes fiscal sense to maintain a diversified portfolio that includes a level of fixed income (bonds), which helps minimize the downturn and reduce risk when the market pulls back.
In fact, "stocks and bonds are not correlated, so typically when stocks go down in value, bonds go up, and vice versa," said Feldman. If you've been handling your own portfolio and have questions, now might be a good time to consult with a professional who can help ensure you are invested in a way that your overall portfolio can handle some dips.
I can always rebalance if necessary
Rather than pulling my money out completely, I can always rebalance my portfolio if I need to make some changes based on the current economic climate. In fact, this is critical to the long-term success of any portfolio.
"If your plan is to have a portfolio of 80% stocks and 20% bonds, and the stock market sells off to the point where you are now at 65/35 allocation, you need to sell your bonds and use those dollars to reinvest back into stocks, which are now at much lower prices," said Feldman.
Emotions shouldn't be a factor in financial planning
I know, I know that's easier said than done. Emotions often play a big factor in our money choices (whether or not we go back to work after having kids, whether or not we take time off to care for aging or sick family members, etc.), but when it comes to the stock market, letting your emotions dictate your money decisions can have devastating consequences.
"No one likes fear and uncertainty, and unfortunately it often leads to emotional and impulsive decision-making," said Feldman. "When it comes to your retirement and long-term investment planning, nothing could be more detrimental to your future success than acting emotionally and impulsively."
Remember, you don't have to navigate this confusing time alone, either. Certified financial planners are especially helpful during times like these to help you figure out the best moves for your money when things are uncertain.
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