Big changes have unfolded over the last two weeks, and with those changes, came questions of recession, depression, or perhaps just a general market correction.
These changes have made a lot of us question our investing strategy; many of us are wondering how bulletproof the mutual funds or stocks we’ve chosen are, now that the world seems to be crashing down around us.
You may be wondering if you should move money into safer assets, like bonds or cash, or you might be wondering if you should switch to other, seemingly undervalued assets now that they’re “on sale.”
These are the wrong questions to ask.
It’s never a bad idea to evaluate your investment plan. It is, however, not a good idea to completely switch your investment strategy during a major market downturn while tempers run high and emotions cloud good judgment.
The selling price of all assets decrease during a recession or general market correction. During a correction is not the right time to wonder if you’ve fairly priced the assets you’ve bought and the soundness of your investment decisions.
You want to come up with your bulletproof plan before the proverbial sh*t hits the fan.
But to get to the specifics, if you sell your investments now because you’re feeling defeated, you’ll likely sell close to the bottom of the fair market value for stocks during the downturn.
If you have a home, you try not to sell it during the deepest parts of a recession because you will get far less for it than if you sell it during a time when real estate prices are up.
To stick with the real estate scenario, the fair market value of your home changes as quickly and as drastically as any stock, but this change is invisible because there is no ticker telling you at any given time what someone is willing to pay for your home.
Selling your investments now is exactly like selling your home because you get scared because someone made a low offer to buy it.
If you’re not sure what to do, meet with a financial professional and review your options.
Do not make any rash decisions. And work on creating a plan bulletproof enough that during the next downturn, you feel confident enough about your investments you don’t even reconsider it.
This article is not meant to constitute legal advice. For help regarding your specific situation, please consult a local professional.