VOL. 131 | NO. 46 | Friday, March 4, 2016
Rays of Wisdom
Dana and Ray Brandon
Don’t Panic Over The Market Drop
RAY and DANA BRANDON | Special to The Daily News
Ray’s take: The stock market has had one of the worst starts of the year ever, and the roller coaster shows no sign of letting up. Market naysayers have stolen the spotlight and are further inciting panic with their rhetoric.
Should you sell everything and get out now before it gets worse? Unfortunately, it’s not unusual for investors to panic and sell out amidst a market downturn. Memories of the 2008 bear market are still pretty painful.
No one has a crystal ball, but history suggests that it is a bad plan to follow the herd as it runs off the cliff. When it comes to investing, our greatest enemy is not the market, but ourselves. If you’re a long-term investor, what matters most is not what happens next week, month or even year. What matters most is what happens over your relevant time horizon, and if you are in the stock market that should be 10 years or more.
America’s economy is still in relatively good shape, and keeping a portion of your portfolio in stocks should pay off. It’s how you grow your money and beat inflation over time. It doesn’t mean you make money every year, but the up years outweigh the down years. Right now, the U.S. economy is growing and the Fed is being very cautious.
Holding fast in turbulent times is difficult, but usually the best course of action. Even if you do “get out” before a downturn, picking a re-entry point is extraordinarily difficult. Having a carefully created plan that includes asset allocation and a time horizon is your best bet. The allocation should be one you can live on (achieve your goals) and live with (avoiding panic in down markets).
Since March 2009, we’ve had unusually low volatility and generally up trending markets. That is not typical. We should not expect asset class returns without some “tests” along the way.
As behavioral finance experts and financial planners alike will attest, corrections and bear markets are part of the journey, and they don’t mean you should change your investment plan.
Dana’s take: If you've looked at the stock market at all this year, you know it's cringe-worthy.
It can be really easy to let your emotions drive your investment decisions, especially during periods when the market is dropping like a lead balloon. The best way to calm those fears is to widen your scope. Are you looking at the last six months or the last six years?
Most investors make their money over a long period of time through a lot of ups and downs. We’ve all heard of Warren Buffet – The Oracle of Omaha. It took him a long time to get rich. Do you really think you can make money any faster than the Oracle of Omaha?
Ray Brandon, CEO of Brandon Financial Planning, and his wife, Dana, a licensed clinical social worker, can be reached at brandonplanning.com.