If the enormous stock market drop toward the end of August spooked you, you aren’t alone. The drop made headlines as the usual doomsday predictions swirled. While prices did have bounced back to some degree, you’re probably still feeling concerned. But smart investors know to separate logic from emotions, and to avoid reactionary decisions. In the wake of recent events, follow these tips to maintain financial equilibrium.
Get a good deal. What goes up must come down, and what goes down will probably go back up (other factors considered). While a massive drop can be concerning for obvious reasons, it’s also a great time to get a good deal on previously expensive stocks like Apple, Amazon, Netflix, or Tesla.
Diversify your portfolio. Hopefully you’re already diversifying your assets, but take another look. Are you invested in assets and classes that are not perfectly correlated with large-cap US stocks? That could be important in the months to come.
Don’t rush out to buy bonds. You might think of bonds as a safe place to stash your money, but keep in mind that rising interest rates spell trouble for bond owners. With rates remaining at historically low levels, there’s only one place for them to go: Up. Dumping a lot of cash into bonds might not be the best solution right now.
Don’t panic. Any drop in the market is bound to spark talk of Armageddon, world wars, and any other disaster the imagination can conjure. How many times have we hear this before? Does Y2K ring a bell? Before you stockpile canned goods and trade in all of your stocks for firearms, remember that the rest of the world depends as heavily upon a healthy market as you do. Investors, policy makers, and world leaders will work together to keep their own boats afloat – and we will all benefit.
Focus on the long term. It can be easy to panic over the events of this summer, but remember that you’re invested for the long term, anyway. Take the time now to analyze your portfolio, make necessary adjustments, and set your sails for the long journey.
