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Your Money’s Worth, By Steven J. Bailey, CFP, CLU, ChFC

What do you do in down markets?

July 4, 2008
Salem News

If you have been watching the news or reading the papers lately you will have heard that the economy is slowing down and that the financial markets are well below their hi ghs.

How long will the decrease in the market last? Will it continue to go lower or is it at or near the bottom? Is it a good time to invest new money in the market? These are questions that every person that has money invested in the markets is wondering. So what should you do when the market starts to fluctuate or decline in value?

Throughout the market's history there have been many times when the market increases or decreases in value. When the markets start to move in one direction or the other, people tend to react by starting to buy or sell their investments. Is this the correct thing to do? There is not one single answer to this question because it all depends on each person's circumstances, what their own individual goals are, and the amount of time you have before you have to start using your investments.

So if you are trying to decide what to do with your investments you need to ask yourself whether or not you are acting on your emotions or on the goals that you have established.

When creating your financial goals you need to determine what your time frame is and what you want to accomplish during this period of time.

Once you have created a plan, you need to revisit it as your circumstances change and make adjustments accordingly. If you have a long time before you will start taking money from your investments, a down market could be beneficial to you because you could be buying when investments are so called "on sale" and these investments could grow faster when the market starts to increase.

For example: If you are 40 years old, have been investing regularly in your 401k, and you have an additional $25,000 in your savings account that you would like to invest for retirement, you may decide that since the markets are down it would be a good time to invest the money.

Whereas if you have a relatively short period of time before you start taking out your investments, you may want to reevaluate your financial plan and make sure that you are properly diversified.

For example: If you are 57 years old and you have just decided that you want to retire in three years, you may want to reevaluate your investments to make sure that you are properly diversified so that a down market will not delay your retirement goals.

So when you see the markets start to fluctuate or decline in value you need to look at your overall goals and determine what would be best for you.

If your goals allow you to invest more in the market, then you may want to take advantage of a down market by buying in at lower prices rather than waiting for the markets to go back up and start buying when the markets are higher.

If you are unsure what to do or have not established any financial goals you may want to contact a financial advisor to assist you.

Steven J. Bailey CFP, CLU, ChFC is a registered representative of American Portfolios Financial Services, Inc. Member FINRA/SIPC, Advisory Services offered through American Portfolios Advisors, Inc., located at 992 E. State St. Salem and can be reached at 330-337-7720 or www.baileyfinancialplanning.com if you should have any further questions regarding this matter.

 
 

 

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