Have you heard that old adage? The one that states that “if you find yourself in a hole, stop digging”? Digging makes it deeper and therefore harder to get back out, which is used as a metaphor that when in an untenable position, it is best to stop carrying on and exacerbating the situation.
Here’s a question… is the current market a wave, or a hole? Personally, I think it is a wave…but right now, many people are thinking about it as a hole.
It seems like when everything is going well in the stock market, people resent limiting their upside. If the market is doing +19% then by golly, they want to do +19% too. And if someone has decades until retirement, or 8-10 years before sending their kid to college… then sure, I think it’s fine to be totally invested in the market.You can adjust and adapt your investment strategy as you go, but make sure you’re making decisions based on data and awareness, and not on fear and worry. Click To Tweet
But then when the market goes (ahem) the OTHER way, everyone forgets this is a long game. That’s fine. You can get out, if you want… as long as you remember to make a plan to GET BACK IN to the stock market.
In the last correction cycle, we went down more than 40% over 18 months, but then in the following 18-24 months, we made it all back. Right now the market is all over the place. But potentially, I think it could be going down for another year or so. So yes, it is volatile, but this is one of several recession cycles that will likely happen (or has happened) in your career.
If you’re REALLY freaking out, you could move some money out of the market and into investment options which should not be as volatile. Wait a minute Mindy, isn’t that a big NO-NO to touch your investments when the market is going crazy? Well, a little bit, yeah – because studies show that when people get out of the market, they delay – or don’t bother – getting back in, and then you miss out on all of the growth that comes AFTER a recession. So you have to be strategic about it. You have to get back in.
Here’s another analogy… You’re on an elevator. It’s rickety, it’s rattley and it’s freaking you out. You get off. A better, more structurally sound elevator comes along, but it’s slower. While the old elevator is careening its way to the bottom, this elevator methodically makes its way down. It also requires you to get off every 3 floors then get back on, and recommit to pushing the button to where you’re going. It will get you to where you want to go, but it might be a bit slower. When you’re going up, the rickety elevator isn’t as scary. But then going down…well, that is when people get super clear on their risk tolerance.
The thing is, whatever you do…you need to be methodical. You can adjust and adapt as you go, but make sure you’re making decisions based on data and awareness, and not on fear and worry. If you get out at any level, you’d want you to make a plan to get back in the market methodically. But if the market is going down for another 12-15 months, you would have plenty of time to buy at lower and lower prices.
If you need a plan, we’re here to help!