Is now the time to buy? How can one be ready to invest when the stock market is down? Should I just sell everything and bury my money in the back yard?
These questions come up during times of volatility and remind me of the importance of basic financial planning: knowing how much you earn, how much you save, how much you spend, and how much you have remaining. They also remind me of the significance of having an Investment Policy Statement (IPS).
In the April 2022 issue of Positively Haywood, you learned about the IPS: what it is, how it works and why it is important. Ideally, you collaborated with your CERTIFIED FINANCIAL PLANNER™ to create an IPS to direct decisions about your investments in a way that aligned with your financial plan.
While it can be tempting to buy when stock prices are low, remind yourself to look at your IPS. Does the decision to buy right now align with your IPS?
If you are still in the process of crafting your IPS, here are some pointers to help you stay the course during times of market volatility:
Prioritize what is important. Your emergency fund, retirement savings and paying down high interest rate debt take precedence over investing money in the market.
Stay the course. In times of volatility, if you have access to a retirement plan through your employer, consider continuing your contributions. By continuing to contribute, you may accumulate shares during the highs and lows (known as dollar-cost averaging into the market).
Ice the hot tips. Keep your cash and avoid hot tips. While it may be tempting to invest in what people are calling the next big thing, you may pay a premium and potentially derail your financial plan. Always remember to avoid investing what you cannot afford to lose and avoid investing in what seems to be too good to be true or complicated to understand. Protect your money by researching specific investments prior to investing.
Inflation is real. In simple terms, inflation means that the dollar you have today will be worth less than a dollar tomorrow. Historically, a diversified portfolio of stocks, bonds, real estate, and commodities has outpaced inflation. The same cannot be said of cash.
Talk with your CERTIFIED FINANCIAL PLANNER™. Market volatility can be scary. You may look at your investment accounts dropping in value and panic. This is when the training and experience your CERTIFIED FINANCIAL PLANNER™ has with different types of markets and financial plans matters most. Prior to taking any action, talk with her about your concerns and your ideas.
By revisiting your Investment Policy Statement and overall financial plan, you may recover a peace of mind during times of market volatility. If you need help during such times, a CERTIFIED FINANCIAL PLANNER™ may help you stay the course and achieve your personal financial goals.
Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™. For more information about Wendolyn’s financial services practice, please visit her website at www.wtf-asn.com.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.
Originally published in the June 2022 issue of Positively Haywood. https://www.vicinitus.com/