Monday, August 24, 2015

Don't Panic

As the Dow plunges and the 24/7 news channels spout stories of doom, don't panic and sell stocks.

Presumably, your stock mutual funds and ETFs are part of a saving plan for college and/or retirement and are part of a diversified portfolio which includes bonds, international stocks, and cash.  Unless you need the money tomorrow for retirement, why sell now?

  • It has been proven time and again that you cannot time the market (buy low, sell high).  I have lots of friends who are still working because they sold all their stocks in 2008 and 2009 and then waited too long to get back into the market and missed the huge runup in 2010-13.
  • There is little yield in cash, so your money will not be working for you
  • Markets always come back, although sometimes it takes a long time
  • You should have a cash cushion for emergencies or if you are retired, a cash cushion of a few months expenses that you can spend in the short term.
  • Think of it this way: stocks are on sale for 10% off what they were a month ago.
If anything, now is the time to buy some stock mutual funds or ETFs.  Not too much, moderation is always the key, the market could go down further and there will be even better buying opportunities.

As always, beware of what you read on the Internet, like this blog.  Talk to your financial adviser before making financial decisions like this.

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