3 Questions To Ask Yourself During Market Volatility
The easiest time to forget why you are investing is when the market is in free fall – like it has been for the past few weeks. It’s during these times that we need to ask ourselves some important questions. Regardless of whether you make changes to your investments, I would suggest asking yourself these three questions before doing anything.
#1 - Have my goals changed? This is a very important question because it answers the “why” behind your investing. If your goal has been to retire in 10 years and have $9,000/month in income, has that changed?
# 2 - Does my portfolio support my goals? While nothing is guaranteed, history is one of the few tools we have to answer this question. Is your portfolio still expected to produce enough income to live on? For example, if you need $9,000/month, and $5,000 is coming from Social Security, is the portfolio still expected to produce the $4,000/month?
# 3- If I get out, what is my plan? If you have decided you just want to be out while things are bad, I would encourage you to define specifically what that means. What would have to be better in order for you to get back in? This is a very difficult question to answer because “bad news” doesn’t always correlate to “bad markets.”
For example, on March 13, 2009, a few days after the bottom of the US stock market, the Wall Street Journal wrote a piece called “Americans See 18% of Wealth Vanish. It described a well-off family that was just now making the decision to downsize and start couponing as a “survival tactic.” The article went on to briefly reference the previous few days of positive returns but quickly returned to the 16% decline since the fourth quarter. (Kalita, 2009).
Because of the timing of articles like this, I would encourage you to make a plan that does not only include what is the headline news.
Thank you for reading,
Alex
This blog post is not advice. Please read disclaimers.
1. Kalita, S. Mitra. “Americans See 18% of Wealth Vanish.” The Wall Street Journal, Dow Jones & Company, 13 Mar. 2009, www.wsj.com/articles/SB123687371369308675#project%3Dwealth0903%26articleTabs%3Dinteractive?mod=article_inline.