Controlling your response to market turmoil

October 24, 2018

Given the recent heightened market volatility, it is important to not to let emotion/panic drive decision making.  If you are checking your portfolio value during times like these, it can make sticking with the long-term plan more difficult. 

As advisors, we never want to see your portfolio decline in value, but the reality is that it is an inevitable part of being a long-term investor.  The market will go through periods, despite strong earnings, where geopolitical/macro events trump individual companies results.  Timing these events or trying to trade to limit exposure normally results in more pain than gain. 

Below is a list of things to keep in mind when the market is in turmoil:

1. What is your time horizon?  Are you planning on needing a large portion of this money over the next year or two, or over the next 10-20+ years?

2. Look back in history to see how many times in the last 2 years the market declined by a similar amount.  What happened over the next 6 months?

3. If you really look at the breakdown of your portfolio, where are the 'losses' occurring?  In other words, are the majority of your losses from bonds or stocks?  If stocks, then consider the gains that have been made over the several years.

4. After going through and responding to these questions, is the market and the volatility in your portfolio resulting in you losing sleep at night?  If so, it is time to revisit your plan and long-term asset allocation.