With the sudden downturn in the market is there reason to be concerned? Is the sky falling, are we returning to a 2008 scenario? What is going on? I don’t know for sure because the crystal ball I received 15 years ago seems to have frozen in its bubbling up stage. They told me that was a temporary condition. I guess I should have asked: “for how long?” But I digress.
What I do believe is this: money is moved by emotion and justified by thought; moved by emotions like fear, hope, and greed and justified by thoughts that enable us to take action.
There are examples of financial hysteria market build ups like the tulip frenzy of the 1600s, the gold rush in the mid-1800s, the tech bubble of the 1990s, and the mad-cow scare of the early 2000s. Panic and euphoria are great catalysts to move the market into wild swings bringing both challenge and opportunity.
What should YOU do? I don’t know what you should do, but I will tell you what I asked my clients, when I was in the financial business both when the 2000 tech bubble burst and in 2008 when the market crashed.
- If you want to stay in the market, are you prepared for the roller coaster ride that might be coming as the market moves through the hysteria?
- If you want to stay in the market, how much loss are you willing to take on a total percentage of your invested assets?
- If you experience a loss, how can you differentiate and measure between hysteria loss and loss due to fundamentals? They are different and I think, should be treated differently.
- How can I best lead and serve you as the market goes through its gyrations because sometimes it is prudent to get out and wait the correction out while sometimes it is better to stay in and reposition.
- If you want out, what is drawing you to that conclusion? Is it your fears, media frenzy, or fundamentals in the market breaking down?
- What will you and your advisor put in place to determine buying signals to get back in?
Build a strategy for yourself with your broker/advisor much like you would prepare yourself for a fire, flood, tornado, or earthquake emergency you might have while home. Put together a financial emergency kit. You might need it someday.
Leave a comment about how the market or news events are shaping your behaviors with your invested money. I’d be interested in hearing how you have prepared yourself for a potential market downturn.
Focus your life: Tips 