By Bob Barber, CWS®, CKA®
The only guarantee in the stock market is that it will have ups and downs. This is true in any market, not just the stock market. So what should you ask yourself when the markets are in a downward trend? Take a look through the following seven questions to help you weather the storm:
- Will I need everything in my diversified investment portfolio in the next 1 to 3 years to live on?
- Do I have enough funds that are NOT in stocks and equities to last me for the next 3 to 5 years to live on while waiting for the stock portion of my portfolio to recover? Note: A moderate portfolio has as much as 40% to 60% in fixed income – that you can draw from – which allows the stock market portion of the portfolio to recover over time.
- Am I smart enough to perfectly time the market by getting out at the perfect time and getting back in at the perfect time? Note: just missing 3-5 days of positive market returns in a month can affect overall performance dramatically.
- Do I believe every day things I use and am invested in will no longer be needed? i.e. technology, healthcare, medicine, utilities, gas, transportation, food, shelter, clothing companies, etc.
- Will I allow “short-term thinking” to get in the way of long-term success?
- When the markets are down shouldn’t I look at it as a buying opportunity instead of a selling one?
- Do great investors like Warren Buffet go with the crowd and run away from the markets when they are correcting, or buy stocks at lower prices?