I currently have approximately $225,000 invested in the stock market. Most of that is in conservative stocks and bonds. Do you have an opinion about staying the course or liquidating all or a portion for a few months or years during this newest crisis?
Your question is a reasonable one and addresses a common theme among investors. Naturally, a volatile market and unpleasant economic conditions will cause some concern. They may have people questioning whether they should be doing something different with their investments – such as selling them all and holding cash – to avoid potential losses.
However, making investment decisions based on what you expect markets to do is usually not the best approach. I always recommend staying the course, assuming you are on a clearly defined course.
While I can’t directly advise you on what you should do in this setting, I can educate you to help you make a decision.
A financial advisor can help you build an investment plan. Find an advisor today.
Pitfalls of Trying to Time the Market
Here’s what to do during stock market volatility.
The biggest issue with jumping out of the market when things appear like they will be rough for a while is timing.
How do you know when it is the right time to sell? The simple reality is that you can’t know with any degree of certainty.
I’ll suppress my inner academic desire to explain this from a theoretical perspective. Instead, we can take recent history as a concrete example.
On Feb. 14, 2020, the S&P 500 was at 3,380. But by March 23, the S&P 500, which is the most widely used broad measure of the U.S. stock market, had fallen to 2,237.
The middle of February was the time to sell to avoid that approximately 30% decline. But who knew that on Feb. 14 when the information was useful?
The answer is nobody. A global health pandemic and widespread economic disruption were barreling toward American investors, but most of them didn’t know it yet.
Sure, you can estimate, model, suspect, postulate, guess or, if you’re really desperate, read tea leaves. But ultimately, you cannot precisely…