The year is off to a volatile start, with January looking like the worst month for the United States stock market since March of 2020. In this article, we will examine five questions you should ask yourself when stock news is gloomy.

Accumulating Investments

Question number one is, “Are you accumulating investments today?” Market pullbacks mean different things for savers versus spenders, and we will all likely be a member of both camps over the course of our lifetimes. If you are working and saving for the long-term, down markets are disappointing but often temporary; and you get the opportunity to purchase your new investment savings at a lower price than you would have earlier.

Prescription: If you’re accumulating, stay the course and ask if you have more available to invest.

Withdrawal Phase

Question number two is, “Are you in the withdrawal phase?” Retirees spending their nest egg and others who have a goal in mind for funds currently invested should be sure they have an appropriate spending plan that takes the stock market’s ups and downs into account. Time-tested strategies include setting aside cash in advance of short-term needs and taking more of your withdrawals from bonds rather than stocks, allowing for potential market recovery and keeping your portfolio balanced.

Prescription: If you are planning to need money in the short-term, make sure you have a plan as to how you will access the funds regardless of market ups and downs. Keep your plan fresh and relevant as your circumstances change.

Appropriate Diversification

Question number three is, “Have you diversified appropriately?” Your mix of stocks and bonds can make a big difference when markets bounce around. What is the right mix? It depends on your age, your plans for your investments, and your general tolerance for risk. Be aware of factors that might make your investments riskier than the stock market in general, such as concentrated stock with a single company like your employer or something that has done very well for you.

Prescription: If it has been a while since you have reviewed or balanced your investment mix, take some time to evaluate your position. Consider seeking the advice of a financial planner to understand the way your money is invested.

History

The fourth question is, “What has history taught you?” Experts in behavioral finance (how people act or behave with money) suggest that reflecting on past circumstances where investing has been challenging can help investors understand how emotions are affecting their investment decisions. Reflecting on past experiences and lessons learned can help to keep your pulse down.

Prescription: Keep a journal and reflect back on other times when markets were down, and you were concerned. If you notice you are particularly anxious now, write down your thoughts.

Changing the Course

The final question is, “Are you tempted to change the course?” It is natural for investors to feel like they need to do something different when returns are working against them. Counterintuitively, frequent adjustments to your plan often create a path leading to disappointing investment performance. You are not alone if you think there is a better option out there.

Prescription: If you are thinking you might veer off course, avoid alarmist headlines and seek the counsel of an experienced financial planner to evaluate your big picture situation and the goals you’re seeking to achieve.

Our team at Pearl Planning is available to help – reach out to us at 734.274.6744 or email melissa@pearlplan.com.

 

Investment advisory services offered by Pearl Planning, a DBA of Stephens Consulting LLC., an SEC registered investment adviser. Please remember that past performance may not be indicative of future results. Pearl Planning does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. 

Pearl Planning cannot guarantee that the information herein is accurate, complete, or timely. Pearl Planning makes no warranties with regard to such information or results obtained by its use and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Pearl Planning, or any non-investment related content, made reference to directly or indirectly in this presentation will be profitable, equal any corresponding indicated historical performance level(s}, be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or a substitute for, personalized investment advice from Pearl Planning. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. 

If you are a Pearl Planning client, please remember to contact Pearl Planning, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, odd, or to modify any reasonable restrictions to our investment advisory services. Pearl Planning shall continue to rely on the accuracy of information that you have provided. Please Note: IF you are a Pearl Planning client, please advise us if you have not been receiving account statements (at Least quarterly} from the account custodian.  A copy of Pearl Planning’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.pearlplan.com.