Help! My retirement fund took a dive! What should I do?
If your money is soundly invested in a diverse range of instruments, you should not worry. And you shouldn’t panic and sell it all off before it goes down any further – it may cost you in the short term, and it will cost you more in the long term. And then what do you do with the money? Well, since you shouldn’t leave it in your mattress (what happens if your house unexpectedly burns down???), you end up reinvesting it in the same types of investments as before – stocks, bonds, funds, annuities, what have you.
What just happened? You have even less money to invest because you will have to pay capital gains tax on the investment’s growth over the years, because the loss in value is probably not great enough to bring the value of that investment below what you originally paid for it.
So, what should you do? Commit to your course of action and perform yearly financial checkups. Your strategy will evolve over time and should change to accommodate your risk tolerance over the different stages in your life. The question then comes back to your current financial situation and your goals. Do you have children that you want to help through college? Is retirement your big concern? Are you going to help out aging parents? Spend some time thinking about the goals you have and the purpose for your investments, and that will lead you in the right direction. Periodic monitoring and rebalancing is the key, and this should be done with the help of your Financial Planner. Your advisor is there to keep a balance in your total wealth – all of your assets – not just your investments.
Do you want to make bad decisions based on short-term events and think that will fulfill your long-term goals? Probably not. Don’t worry about timing the market, because fluctuations will show up constantly, and you need to plan in spite of that. Remember, market timing is a loser’s game. One can never accurately guess where the stock market is going in the future. Uncertainty in the market is natural, and this is not the first time we have seen it – nor will it be the last. But if you have a well invested portfolio, the stock market’s fluctuations – large or small – won’t cause you stress.
