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Stock Market Volatility Returns
Markets have seen more volatility recently. The NASDAQ, Dow, and S&P 500 have had wild up and down swings. It is possible more such volatility will continue in the coming weeks. Are you prepared for it?
It has been three years since a market correction. Will this be a basic correction or worse? No one knows that, but this is a good time to assess where you stand.
Why are you invested? It is a good idea to reflect on why you are invested in stocks. Do you have a long time horizon? Or a short one? Obviously, all investors buy stocks with the desire to make money. But the stock market doesn't move in a nice straight line up.
If your goal was to invest for retirement, and that is more than five years off, then you simply need to continue following your plan. Your periodic contributions will take advantage of lower prices. This allows you to have an overall lower cost basis translating into more profit.
Are you going to need the money in five years? It may pay to move money out of more volatile stocks and into more conservative investments. For retirees you want to have five years of living expenses in ultra-safe investments. This could be a money market account or a certificate of deposit. This will allow you to pay your expenses even while the market is going down.
One of the biggest challenges during market losses is staying the course. It can be hard to stick with a plan when facing losses. And, in some instances, you do need to cut your losses. But that pertains more to an underperforming stock, not a broad market selloff. It would be profitable to know the future and when to buy and sell. If anyone does know this, they aren't telling their secret. The best you can do is hold a broad market stock fund with a balance of bonds and weather the storm.
Stop watching the stock marketís ups and downs. Leave that to the professionals. That's what they are paid to do. Although you may want to buy stock in antacids because a lot of Wall Street traders may be popping them during this volatility.
It isnít always easy being invested in the stock market. It can produce excellent returns though. Every investor has to learn their tolerance for volatility and how to hold to a plan.
Are you interested in a simple portfolio to save for retirement? Please check out my book on building a simple retirement portfolio that is available at Amazon.com:
Investing $10K in 2014 (Sandra's Investing Basics)
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