The stock market has been experiencing crazy swings since the start of 2016. In fact, the Dow Jones Industrial Average is down more than 10% since the start of the year.
This can cause a lot of alarm for investors. Particularly those who are very close to retirement or who have already retired.
What should a person do in this situation? Sell it all? Buy a bunch of gold and silver? Do nothing at all?
I determine my approach by asking several questions:
- When do I really need the money I’ve invested? This is a great question each investor should ask. Since I have no need for my invested money at this time (it’s for my children’s college and retirement), I’m able to wait out a downturn.
- Do I have the ability to “time” the market? Not really. I can anticipate some changes, but I have no control of global macro economics. With the market being flooded by oil and other commodities, various hostilities between strong nations, credit markets being squeezed, and natural economic cycles, there are definitely pressures on commercial growth. But I can’t time the market. I suspect you are also challenged to do so.
Then I remind myself of various statements of wisdom that have informed my investing during my life. Here are a few:
- “October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain
- “Emotional people buy high and sell low. Smart investors buy low and sell high.” – Unknown
- “You never truly lose until you sell.” – Unknown
So what have I done during this challenging time? The same thing I did in 2008 – continue the course. I continued to invest in stocks (they were on sale!) and other assets (like businesses and real estate) to diversify my portfolio.
This approach has worked well for me for 20 years.
What is your approach?