It has been wild weeks on Wall Street. Stocks finally closed higher, led by a rebound in oil and gas companies as energy prices recovered from a steep drop the day before. Overall, It's been a rough financial start to 20-16 so far!
Concerns around another downturn in oil prices, China's growth outlook and overall sluggish global economic growth are having a direct impact on the markets this year. Sarah Halpin, Certified Financial Planner, with the Danforth Group of Wells Fargo Advisors joins the Morning Report to help us wade through what's going on!
The direction of economic growth, company earnings, inflation and interest rates - rising, slowing, and declining - are all things that can create market pricing changes either up or down in financial markets.
Act but don't Overreact. Stay focused on your investments goals.
Never forget why you're investing. For example, if you are retired and concerned about paying bills a key question in your plan would be "How much cash do I need as a cushion to carry me thru a rough market period so that I'm not selling investments at lower prices to meet daily living needs". Versus someone in their 30s, who may have a longer term goal such as investing for retirement and is looking for ways to maximize savings and can add to investments regardless of market volatility.
Review Your Investment Asset Allocation and Risk Tolerance Regularly
Know what you own, why you own it and make sure that you are comfortable with the mix/asset allocation of investments and the amount of risk you are taking to achieve your goals. Use periods of volatility as a litmus test to your true risk tolerance to help define the asset allocation that is right for you. So you need to ask yourself, do you view market declines as a bump in the road, are you tempted to pull all your long term investments out? Or is this an opportunity for you to invest while prices are low?
Beware our basic human emotions of greed and fear which work strongly against those who attempt to time the market to be all in or all out. It can tempt you to overstay and overreach for returns in up markets and it can keep you in cash on the sidelines too long in down markets which will reduce your long term returns.
If You Are a Long Term Investor Use Volatility to Your Advantage.
If you are saving for retirement and won't be tapping your investments for a number of years, market downturns can actually help you if you are disciplined and are continuously investing and purchasing cheaper shares. You must have the financial and emotional ability to stick with the program through declining markets to benefit when markets eventually cycle higher.
Give your financial adviser a call and let them know of any updates to your financial situation and go over your investment plan and your investment asset allocation. - wcsh6
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