Market turmoil is unnerving and staying calm when the headlines are ‘Collapse’ ‘ Recession’ isn’t easy. The initial instinct is to sell and get out of the markets but you should ask yourself 5 questions…..
1 Have your long term needs changed?
Bear markets are as much a part of the cycle as bull markets, its hard to see the pain of a 20% decline but you ride the storm looking for sunshine ahead.
Think rationally before acting, its human nature to sell when markets drop but really we know the reverse should be done.
2 Do you need money quickly?
If you dont need cash right now then its not wise to cash in when market values have temporarily declined. If you need liquidity then cash reserves should be called upon first.
3 Has your risk tolerance changed?
Answering whether you will stick when the markets drop on a risk questionnaire is very different to actually experiencing that drop, this is when you will find out what your true temperament is.
If volatile markets give you sleepless nights then you made need to change your portfolio to be more conservative because market falls are part of the cycle.
4 Does your current investment strategy support your long-term financial plan?
If you were to make changes to your portfolio will that have an impact on your financial goals and plans? As financial planners we can run scenarios for you to show that ‘what if’ scenario.
5 Are you following a diversified market strategy?
Heavily focusing your portfolio on certain sectors will lead to potential swings in your portfolio so the key is to diversify i.e. small and large companies over difference indexes and locations. Also it makes sense to rebalance your portfolio regularly.
if you want to know more about how we can help, speak to a member of our team today.