Recently, we’ve seen the return of a bear market; and the Fed raised interest rates higher than we initially thought; and inflation start to go back up again (after starting to go down) hitting a new high for the year; and all of that is spurring on renewed concerns around a potential recession. That’s enough to make your head spin! It’s enough to make you anxious and it’s enough to make you fearful when you’re thinking about your investments, and rightly so. This is a lot going on and most of it’s not positive news!
So, what do you do now?
It depends on how you’re investing – if you’re a long-term investor or focused on a long-term goal, the likely answer is… nothing. Most of the time, when it comes to doing “something”, nothing is actually the best thing to do (if you’re focused on the long term of course). It’s no secret that every time that there has been a correction or a drop in the market, it has always recovered. That’s probably the only time that you can say “always” or “never” when it comes to the markets and investing – it has always recovered, and we don’t really see that changing looking forward.
However, if you are investing for the short-term, it’s a little bit different. You don’t want your portfolio dipping and diving as the market sets into a bear market. If you’re looking to use those funds for a goal like a home remodel, or college a few years from now, or maybe a new car purchase next year (once car prices start to come down a little bit), you want those funds to hold a little bit more steady. If you are looking to use those funds relatively soon, you do not want to see a 20% drop in those funds. So, your portfolio should be structured in a manner such as you’re not seeing the same ebbs and flows as you would if you were invested 100% in the S&P 500.
Warren Buffett had a really good quote that said “the market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” Meaning don’t let the fear surrounding everything that’s going on today cause you to make a decision that you normally wouldn’t in any other circumstance! If you have set up something for a long-term perspective, a goal that’s 20 or 30 years down the road, we do so understanding there’s going to be dips in the market – don’t let these dips push you to make an emotional mistake because that fear really sets in.
If you need help figuring out if your portfolio is structured correctly or figuring out how to construct your portfolio for those shorter-term goals that we mentioned earlier, y’all can always reach out to us here. We will help you get that figured out, help you design a portfolio that fits your needs and then let it ride, knowing that the market is going to work in its cycles.