Have you been watching the stock market lately? It’s a little scary! I have two words for you – don’t panic. Resist the urge to run and sell everything. The best thing to do when the market starts to tank (or just dip) is to contact your investment advisor.
If you have a retirement plan through work, you should have met with the plan’s advisor at least once every year when he/she talks with the group about the plan your employer sponsors. Don’t remember that discussion? If you’ve not met the plan advisor, take a look at your most recent brokerage statement; your advisor’s name and phone number should be at the top of the first page. Still can’t find it? Talk with your employer and get connected right away.
Back to the market. We’ve talked about this before. The old adage for market success is “buy low, sell high.” What do most investors do? Exactly the opposite. They hear the “hot tip” at a cocktail party and decide to act on it. The problem is, by the time that hot tip hits the party circuit, it’s no longer hot. Most often it’s already past its prime. But their smart friend recommended it so they buy it. At a high price.
Then the market drops, like we’ve experienced so many times before, and most recently right now. What does everyone want to do? Sell out to stop the bleeding. You may understand that mindset at this moment when stock prices are dropping in real time. You may feel an almost overwhelming desire to sell everything before your portfolio drops to zero. Before you do something drastic, talk with your broker.
My advisor muses he has the only product no one wants to buy when it’s on sale. He’s so right. If we could see the future we’d have comfort buying a low-priced, “on sale” stock. Hindsight is 20/20. Wouldn’t everyone love to have purchased stock in Apple before the iPhone hit stores? But prior to that Apple stock had its struggles. In September 2001, Apple stock sold at more than $60/share. Two years later a share sold for less than $15. Would you really have purchased Apple stock at that time, seeing the downward trend?
I can’t guarantee the market is going to recover from last week’s drop. I only know that historically it always has. Sometimes the recovery is quick, sometimes not so much. Well-run companies are well-run companies, and their stock, whether owned outright or within a mutual fund, usually rebounds.
My advice? Get more information. Talk to your advisor. Read a good business and investment periodical. Take your next step using knowledge rather than emotion.
To your better wealth,