NTV’s Financial Planner Tim Moomey talked investing:
The markets have fluctuated by hundreds of points on many recent trading days. We have been experiencing a very good market, especially since the elections back in November. Now, I have customers with IRA’s, 401(k)’s, or individual investments that can become very nervous. No one knows what is going to happen, but I just want to begin to prepare people for the inevitable downturns that always come eventually. Sometimes it is better to have this discussion now, rather that WHEN the downturns happen.
This is when investment advisers like me try to help people remain calm during these periods of downward market fluctuations. One of the most obvious things I tell people is;
1. Don’t stop contributing. Participants sometimes contact me during times when the equity markets are falling so they can confirm that, “…now is a good time to stop making IRA or 401(k) contributions, right Tim?” Many people wrongly believe that rising markets are good to invest in but falling markets are not. Actually, this can be exactly the opposite. When do you want to “BUY”? When the price is low! As the markets come down and you are making monthly investments you are buying more shares for the same amount of money. Eventually, when the markets come back up, which they SHOULD, you have more shares rising in value.
2. Don’t make significant changes in your account. Many people are pained to see the value of their accounts falling and feel the only way to stop the bleeding is to sell, before their investment falls even more. Realizing losses like this is a major reason most participants average less than half of the return of the funds they are invested in. Remember, markets rise and fall and that if you are long-term investors you should not be concerned about short-term market fluctuations.
3. There is always help. This is a good time to check with your investment adviser. If you are thinking about making any sort of change your account, contact your adviser first.
4. Stick with your plan. Fast moving markets, either rising or falling, are not times during which major changes to saving and investment plans should be made. Emotions tend to color perceptions to a high degree during these times, leading to bad decision making.
5. Volatile markets do not last forever. Nothing good or bad ever lasts forever. Although it may seem like this latest period of market declines will never end, it will likely be over sooner than most think. Riding out the storm is usually the best bet.
In short, stay calm. I believe that you should hang on, hang in there and contact your adviser before making any changes. You can ask your personal advisor about your work retirement plans also. Most of us are very happy to review your 401k – type plans with you to help you decide where to invest and how to monitor your accounts.