What Now?


August 16, 2011
Written by: Steven Causey

For investors, the past few weeks have been a roller coaster and horror movie all mixed into one.  Just when people were starting to gain confidence after the 2008 debacle, another crisis hits the stock market.  Emotions have taken over and many investors are trying to determine what they should do.  To try and simplify the situation, here is a short list of things to consider:

Don’t panic and sell everything – selling after the market is down more than 10% could hurt you more than anything.  Selling doesn’t give you the opportunity to earn back what you have lost.

Reassess your risk tolerance – if you can’t sleep at night because of this market volatility, you may have too much invested in the market.  The closer you are to retirement, the more your portfolio should be allocated toward more conservative investments.  If you need to make changes to your investments, make sure it is based on a long-term outlook and not based on short-term emotions.

Plan – how has this downturn impacted your plan for retirement?  If you don’t know, you need to periodically run calculations to estimate how much money you will need to retire, considering what age you plan to retire, and how much your money will need to earn before and during retirement. 

Save – now is a great time to tighten the belt.  Examine your expenses to see where there may be areas to cut back and save more.

Consider working one more year – if you are about to retire, how does working one more year sound? If you are not sure you have saved enough, working one more year may be the cushion you need.  It gives you one more year of saving and delays dipping into your savings for another year. 

Investing is a long-term race and not a short sprint.  There will be bumps in the road but planning and patience should pay off in the end.

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