Keep Calm and Stick with your Plan

Some of you may be alarmed by news of the down market, but it’s time to take a breath and not panic. So what is going on? The Dow Jones Industrial Average (Dow) suffered a correction, which is defined as a 10 percent decline from its peak. Down markets are never pleasant for investors in the short-term. But a long-term term investor, with at least a 5-year holding period, should stay the course. If an investor’s portfolio has been corrected constructed to match the importance of his or her goals and tolerance toward risk, then selling in a panic is almost a sure-fire way to lose money.

But why did the market take a downturn? While there’s really no clear answer to that question. But part of the answer is likely investor panic.  As the market slowly declines, many investors panic and sell too which fuels the fire. Those who sell their holdings in an acute down market are often times left in a worse position than they would otherwise have been in if they had held their investments through the market decline and waited for the markets to recover. 

So what can you do? It is imperative when developing and maintaining your investment portfolio that you always plan for a down market. Your portfolio should be well balanced and ready for a down-market so you don’t have to panic.

Recent market declines highlight the reality that markets do fluctuate and thus, the importance of a strategic financial plan.  The future is unpredictable, but we are confident that the only way to beat inflation in the long-term (5 plus years) is through a well-diversified, equity portfolio.

The author, Ara Oghoorian, can be found under our tab, “find an advisor”, or by clicking here.

Ara Oghoorian

I have over 20 years experience in finance including working for the Federal Reserve Bank of San Francisco, U.S. Treasury, and most recently a wealth management firm in Washington DC providing financial advice and tax preparation. I hold the CFP, CFA, and EA designations.