As the calendar gets ready to turn, think about your original goals
As we enter December, it’s important to keep the past 11 months in perspective and remember your original goals from the beginning of the year. Sure, it’s been an interesting year – more volatility, market corrections, new market highs, and tax reform – but unless something dramatically altered your circumstances, remember the basics.
Here are some thoughts for you to consider as you begin looking forward to 2019:
Long-Term Investors: Stick to Your Plan
If you are saving for retirement or another goal that is years away, the time to consider how much of a loss you can handle isn’t during a correction. You should consider the appropriate level of risk for your portfolio when planning your long-term goals, assessing your financial situation and emotional reaction to risk.
If you haven’t created a plan, you should. If you have one, it may be wise to check-in to see if your investments are still in line and if your plan continues to reflect your investment horizon, financial situation, and risk tolerance. If everything is still aligned, then you will likely be in a better position to manage the ups and downs of the market. Otherwise consider rebalancing if your mix of investments is off track.
Active Investors: Be Ready
While most investors who have a long-term plan probably don't need to make any portfolio changes in reaction to market volatility, some more-active investors may want to use it as a buying opportunity and tilting their asset allocation slightly. This could mean anything from setting exit strategies on existing positions, using stop loss orders, or tracking technical indicators to shift the portfolio.
More-active investors might also want to consider having a cash reserve and creating a watch list of investments to consider buying at certain price points, always being prepared for buying opportunities during a downturn.
Retirees: Manage Your Income
For retirees who may be relying on their investments for a portion of their income, a market drop can present a different kind of challenge. Hopefully you have an income plan that is built to withstand different market conditions and really shouldn't need to react to a short-term market move. If not, it may be a good time to sit down with a fee-only CERTIFIED FINANCIAL PLANNER™ to discuss your strategy.
Exiting the Correction
For the second time this year, the market has entered into a major correction and exited. While we don’t know if this will be short-lived or the beginning of a bigger downturn, history shows that the market recovers from corrections, and most sound investment strategies are built to withstand volatility. As a result, long-term investors should make sure they are sticking with their plan, and not taking on any hidden risk.
One Final Thought
No matter which type of investor you might be, make sure you schedule time to talk through your 2019 goals with Weiser Financial Planning.