If you’ve been paying attention to the stock market recently, you might feel confused about what’s happening on Wall Street. At the beginning of June, the markets closed at record highs multiple days in a row, and only a few days later they headed back down. For the most part, the markets are creeping up little by little, but nobody knows how long the uptick will last. If every market dip puts you on edge, that could be a sign you aren’t comfortable with your current investment strategy. During this period of market uncertainty, take some time to review your investment plan, and make sure it’s in line with your long-term investing goals. These three steps can help:
1. Get specific about your financial goals
Before you can customize your investment plan to match your goals, you need to know what those goals are. Many investors are growing money for retirement, but you could have other major purchases in your future that you’re saving up for too, like a child’s college tuition. Specify not only what you are saving for, but also an estimate of how much you’ll need to reach your goals, and then keep that in mind as you invest.
2. Consider your time horizon
If two investors are saving for the same goal—retirement—but one of them is five years from retirement and the other is 20 years away, their investment plans probably don’t look the same. Yet many people don’t reevaluate their portfolio as they get closer to their goal, which can be a big mistake in a volatile market. The closer you are to needing to withdraw from your investments, the less time you will have to make up for any losses if the market drops. That means that as your goal approaches, your investment risk should decrease.
3. Look for alternatives
If you are still nervous about losing money in the market after you’ve adjusted your portfolio for your risk tolerance, you could just be a conservative, risk-averse investor, and that’s ok. You don’t want to risk any more money than you’re willing to lose. Instead, look for safer options likes bonds, bank products or insurance products to help maintain your peace of mind.
When you’re investing your hard-earned money to achieve important goals like retirement, you don’t need the stress of the market’s ups and downs causing you concern. Creating a plan for your investment portfolio is an important step on the path to achieving long-term investing success.
Brad Zucker, RFC® is the president of Safe Money Advisors, Inc., a Las Vegas-based independent financial advisory firm. He blogs on personal finance every Monday for the RJ. For more information visit www.SafeMoneyAdvisorsNV.com or connect with him via Facebook and LinkedIn.