U.S. stock markets dropped sharply Monday morning, and even though they already recovered much of their losses, many consumers aren’t sure what to think about the volatility.
Lots of people spent their Monday morning contacting their financial advisers to ask for information on and advice for dealing with stock market turmoil. Several Credit.com contributors are Certified Financial Planners and members of the Financial Planning Association, so we asked them to share the questions they’ve gotten the most in wake of the stock market news. Here’s what they said, in emails to Credit.com (responses have been edited for style):
Q: Should I Be Concerned?
A: The consensus from the CFPs was that investors should not panic.
“Ask yourself, am I withdrawing or close to withdrawing assets from my portfolio?” said Michelle Buonincontri, director of public relations for FPA of Greater Phoenix. “Market declines are only important if you are withdrawing or close to withdrawing, as on a longer term basis markets come back. You should not realistically be investing assets needed in less than five years.”
Several CFPs noted that panic selling is, in their professional opinions, a terrible idea.
“The instinct is to sell stocks, to ‘stop the bleeding,'” said Alvin Carlos, financial planner and managing partner at District Capital Management. “Don’t make the same mistake some people did when they sold their stocks at the bottom of the 2008 financial crisis, only to miss the six-year bull market that came after. Stick to your plan of making regular contributions to your 401(k).”
Some mentioned that this sort of event was to be expected, but the best thing to do at this point is remain calm and patient.
“We were due for the correction. Last correction was about four years ago,” said Rich Durso, director of financial planning at RTD Financial. “The market moves in cycles. Based on the history of the stock market since 1928, this will also pass.”
Q: How Long Will This Last?
A: There’s no way to know for sure.
“We never know how long these types of movements last, very fast dramatic moves tend to be shorter time frames than longer drawn out recessionary moves,” said John A. Kvale of J.K. Financial, Inc. “If this turns out to be a recessionary precursor, then we may expect a longer time frame of movement. … Most importantly, stay calm and do not knee jerk in any direction.”
Q: Should I Be Getting Out of Stocks?
A: Again, the advice from the pros was don’t panic. It’s probably best to stick with your plan for long-term success.
“You cannot time it, and acting on emotion with everyone else usually ends up being a poor decision,” said Joseph D. Clemens, co-founder and owner of Wisdom Wealth Strategies. “Although many cite ‘asset allocation’ as the number one driver of investor returns, it’s actually ‘investor behavior’ in times like this that can make or break your long-term success.”
Several of the planners said that if you do anything, it would be to buy more stocks, because they’re at “bargain prices” right now. They continued to say that if you’re going to buy, do so in a small way, because this may not be the bottom of this particular bout of volatility. If you have any specific questions about your portfolio or your asset allocation and how it’s been affected by today’s turmoil, it’s always wise to talk to your own financial adviser who knows your savings goals and can give you personalized advice.
Retirement planning can certainly be stressful — not to mention something you don’t want to endanger — but it’s generally a long process that requires patience and careful reassessment as your goals may change. There are many other aspects of your finances that need attention on a daily basis, like your budget and credit standing. You can’t control what’s happening in the stock market, but you can make sure you’re making smart everyday decisions that keep your spending in check and prevent you from going into debt or damaging your credit score. Here’s an explanation of what a good credit score is and how you can build your credit up to a solid score. (You can check your credit scores for free on Credit.com to see where you stand.)
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