Aug. 24–Investors are only seeing red when they look at their portfolios as the stock markets continued to drop on Monday.
But local financial planners say that investors should keep calm despite the fluctuations and know that the 10 percent market correction is a short-term issue.
Here’s five tips that North Texas financial experts are telling their clients.
1. Don’t keep the market charts up on your computer screen
If you have CNBC or Bloomberg News on in the background, your emotions will get the better of you, says Jerry Singleton, chief executive of Signal Securities in Fort Worth.
“I tell a lot of my clients to turn off the TV and throw away the magazines and just stick with your long term plan,” Singleton said. ” We look at the market as a marathon and not a sprint, therefore you have to just ignore the shakes out there.”
Investors should never make business decisions when they are having an emotional reaction, he said.
2. Know how much risk you are willing to take
Investors should take a long term approach to their investment portfolio and that includes knowing how much of your money you are willing to place in equities, said Dennis Carpenter, president of International Wealth Ministries in Grapevine.
“If you cannot withstand a pull back within the next five years, then you should not be in the market,” Carpenter said. “If you need your money in less than five years and are planning to retire in three years, you really need to consider diversifying your portfolio.”
3. Keep bonds as part of your investment portfolio
Even though yields from bonds has been low as the Federal Reserve keeps interest rates low, bonds should be a part of an investment portfolio.
Byron Green, president of Green Investment Management in Fort Worth, said the outlook on bonds has not been favorable but having bonds as part of an investment strategy gives a portfolio balance.
“Most clients are going to find that having bonds in their portfolio gives them a counter balance to equities,” Green said. “When things go like they are right now the bonds are the only offset you have to the equity part of your portfolio. It gives good balance.”
4. There are some good buys in the market right now
When the stock market drops by 1,000 points as it did on Monday morning, investors with some extra cash will find some great deals.
Aspen Wealth Management president Helen Stephens said the low stock prices gives investors an opportunity to rebalance their portfolio if their equity portion is too small.
“This morning, some of the stocks were off so much it was just shocking, the value that is there,” said Stephens, a Fort Worth financial planner. “There were definitely some buying opportunities.”
5. Don’t sell your stocks in a down market
Selling stocks in a down market in a panic is exactly what financial planners say not to do.
“It is not smart investing if you think about throwing in the towel and selling when the market is near the bottom,” said Alison Geiger, managing director of Heritage Financial Planning in Dallas.
Geiger said if an investor sold stocks at losses on Monday morning they would have taken larger losses than if they had waited since stocks went back up by midday.
“It is very important to stay the course and listen to your financial planner and not let your emotions get the best of you,” Geiger said.
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