It’s human nature to let emotions run high during any type of a crisis. A financial market crisis only fuels the fire as people worry about losing their money. There are a few ways to manage your reactions and avoid becoming a casualty of panic selling. Try using these strategies the next time a crisis is occurring.
1. Give the media a break.
Financial news and media pundits are constantly looking for ‘breaking news’, that is, something that will grab the headlines and your attention for a while. And let’s face it – doom and gloom get more media attention than positive information does. Sort through the information and find the kernels of truth that are causing the situation. This is what you need to pay attention to and deal with.
2. Reevaluate your portfolio holdings.
Does the current situation really effect the overall health of your portfolio? This is an excellent opportunity to take a deeper look at the companies you hold stock in. Also, if there are places you wanted to invest and felt the price was too high, they might be on ‘sale’ right now – giving you the perfect entry point.
3. Plan for it.
As sure as the sun rises and sets, there will also be corrections in the market. They may cause some pain and the level of that pain can be mitigated with proper planning. Diversification often comes into play here, as no one can predict exactly what will cause the next crisis or guarantee and outcomes. By having a well-diversified portfolio, you can give yourself some protection. This means a variety of stocks, bonds, mutual funds and cash.
4. Keep your eye on the ball.
Avoid knee-jerk reactions to market hype and keep your goals firmly in place. Let your plan work for you as hard as you worked to make it. For people who are already in retirement, they should have enough cash on hand to cover their expenses for up to a year. This eliminates the need to sell principle and protects the investments.
5. Use history as your guide.
Throughout history there have been a number of market crises. For each time the market has gone down, it has also recovered and then grown. Chances are good that if you’re planning for the long-term, shorter term corrections won’t even be a blip on your radar.
Routinely go through your emergency plan for dealing with markets in turmoil. This ‘life boat’ drill will lead you to better handle the inevitable emotions associated with investing. As always, the professionals at Meyer Wealth Advisors are here to answer your questions and help you formulate a plan that works for you. Give us a call at 630-896-7770 today.
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