By Gary Silverman, CFP®

Last week I left you with a scenario where you had an investment portfolio that had been 50-50 stocks/bonds and now, due to a 20% market drop, was now 45-55. If you were to rebalance your portfolio back to 50-50 you will be buying into the stock market at a discount from where it was prior to our virus-induced crisis.

But what if the stock market keeps going down? What do you do? You rebalance again. And again.  And again. Remember, neither you nor I have a clue what is going to happen next month, let alone next year. But if history is any guide—and given that looking at a chart of the markets stock always come back—each of those buys is a good long-term decision.

Remember, in the scenario we were working on last week, we didn’t need the money for quite a few years. This is the key. Either just waiting the market out or rebalancing every-so-often works out if you have time.

Just as rebalancing sets you up well for future gains, you can’t get piggish about it. When the markets start going up and your portfolio balance has you too high in stocks you will want to rebalance back the other way, selling some of the stocks to refill up the bond/cash part of your portfolio.

The problem is that humans have a difficult time selling down the part of their portfolio that is doing good in order to buy what is doing no-so-good (or downright miserable). I can’t help you there, except maybe recommending hiring someone to do it for you by getting your own advisor or buying a target-date fund (we’ve talked about those many times in the past in my columns).

All the above assumes you have time: Time for the market to do whatever it’s going to do in the short-term (which may be measured in years) and get back to and above where you got in in the first place. But what if you don’t have time to wait? What if you need to cash in some of your stocks soon?

I’ll address how to avoid that situation in a future column, but for now you need answers. This is where it gets very tricky.

The problem is that while in the long-term stocks go up, in the short term we just don’t know where they are going to go. Just because they are down a lot doesn’t mean they won’t be down more. Nor does it mean they won’t pop back up this year.

We just don’t know.

This isn't a problem if you investments are for a something that is quite a few years away. But what if you want the money within the next year or three? Do you hold on and hope that things get better before you cash them out? Do you sell now to protect against further losses? Quite frankly, you've got a dilemma which I'll go into next week.

 Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing.