- Maybe you thought the stock market's remarkable run would never end, or maybe you knew last year's impressive gains wouldn't last forever.
- Here's what to do — and not to do — now.
Maybe you thought the stock market's remarkable run would never end, or maybe you knew last year's impressive gains wouldn't last forever.
But you probably didn't expect the dramatic swings of the past few days. Yet, a steep decline in the major stock market averages doesn't mean dire consequences for your long-term investments. Here's what to do — and not to do — now:
Remember why you are investing. You have goals. You want to buy a house in five to seven years. You want to pay for college for your kids — or at least defray some of the cost. You're saving for your retirement. You are investing now for what you want to do in the future.
If you don't have a plan, that's a problem. Work on one now. If you do have a plan, then you need to stay the course.
"Financial planning helps remove emotions from investing and helps keep your focus on your goals, not the markets," said financial advisor Douglas Boneparth of Bone Fide Wealth in New York. Review what your goals are, and then stay on that plan.
How much risk can you really stomach? This market slide will be a good indication. If you've lost sleep, you may want to reassess whether you are investing too aggressively.
You'll definitely want to stay invested in stocks for the long term but may want to diversify the mix of stocks and stock funds in your retirement, college savings plans, and other accounts.
But if you need the money in less than five years, it probably shouldn't be invested in stocks.
Cathy Curtis of Curtis Financial Planning in Oakland, California, tells clients "if something has changed in their financial life, and they will have a need for some cash in the next two to three years for a large purchase, then I recommend that they reduce their allocation to stocks." Review what you own now and why — and research your options before making any moves.
Speaking with a pro who has weathered market turmoil many times may help give you a much-needed gut check in this volatile time. Talk to a financial advisor, a professional to help you, calm you down and work with you as you review your goals, reassess your risk and perhaps reset your investment strategy. Find one through the Financial Planning Association or National Association of Personal Financial Advisors. Again, it's a good time to gain some perspective, it's not a time to panic.