Riding the Market Rollercoaster Part 2

Personal Money Planning |

By Gary Silverman, CFP®

Three weeks ago, my recommendation to those who were invested in the stock market but who now realize that was just not a good decision for them (and not just because stocks are down this year) was: Try to ride this one out, sell once things get better, and don’t look back.

Last week I explained that if you ride it out that doesn’t mean everything would be peaches and ice cream. I pointed out that the stock market could still go down a lot more and that places where the rest of your portfolio might be invested likely have their own problems and won’t necessarily prop up your overall returns—at least not for a while.

The purpose of that message is to let the hangers-on know that this can be a rough ride. While I don’t think it will have results like we saw during the Financial Crisis, I don’t know that it won’t. So, about that “Try” to ride this one out, I need to be Yoda-like. Do or do not. There is no try.

The absolute worst thing that can happen to your portfolio at this point is to say to yourself, “I can hang on,” then watch the market double its losses and sell. I don’t know you, so you’re the one who will have to look in the mirror and ask yourself whether hanging on results in a worse loss than if you just got out now.

Don’t get me wrong. I’m not saying that it is time to call it quits on equities. The market might not go down further. Recovery could be fully realized this year. BUT. That’s a big word. But if the market does go down a lot more and if that causes you to panic (a rather normal human reaction) and if that panic causes you to sell, you will be in a worse state than you are now.

What am I doing? I’m riding this one out. But I don’t get worried when the market is bouncing around, I adjust my (and my clients’) portfolio strategies to account for things like bear markets, recessions, and the like. It’s not that I won’t lose money, I have, and I will. It’s that I have the ability to hang on for the ride. That the market will recover, I have no doubt.

In the meantime, I’ve made plans to ensure that while waiting for it to do so, my portfolio’s setback won’t affect my lifestyle now or in the future. That is the habit I want you to mimic if you choose to invest in something that the price can be volatile (like anything other than cash).

Next week we move on to put this market into context. See you then.

May Ukraine stay free.