August 22, 2015
If you have been following the stock market or listening to the news, you may have taken notice of the down market. This is not a time to panic, but it is a time for plenty of opportunities. Market declines like this are perfectly normal. They are expected to happen, but nobody knows exactly when they will occur.
I have not heard about the market, what is happening?
The stock market had a rough week and the Dow Jones Industrial Average is off by 10% from the market’s high in May. When the market declines by 10% from its peak, we consider this to be a market correction. The reason for downturns is usually very cloudy. However, one likely cause is typically investor panic. As investors begin to sell, other investors take notice and also begin to sell. This domino effect results in a market decline.
What should I do about it?
Continue buying stocks when opportunities arise, do not try and time the market, and stick to the investment plan at all times. We can use market corrections like this as an opportunity to buy additional stocks at a low point. Think of this as buying stocks while they are on sale.
Emotional reactions are rarely helpful. Do not panic! Selling your investments during turbulent times is a bad idea. Those who sell during a down market are typically left in a worse position than if they simply held on to their investments while the market recovers. Our clients’ portfolios are always invested appropriately and although market declines are worrisome, this could end up being just another blip in the long horizon. The focus always needs to be long term by being able to see past current headwinds.
Our investment philosophy always accounts for down markets. Declines like this have happened in the past and will likely happen many times into the future. Maintaining an appropriate and well-balanced investment strategy at all times, regardless of current market conditions, is one of the most fundamentally important investment strategies.
The reality is that markets consistently fluctuate. Fluctuations and volatility are perfectly normal events. Our clients’ portfolios are invested with this in mind. While the future is unpredictable, a diversified portfolio of stocks tends to be one of the best methods for growing long term wealth and beating inflation.
Disclosure: This market update was written by Tyler Rivetti. Advisory services are offered through Rivetti Investment Services, LLC, a Registered Investment Adviser.