First and Foremost, Stay Calm!
Investment decisions made in haste and under stress are rarely good ones.
Think about re-balancing your portfolio to make sure your investments remain aligned with your original objectives and risk tolerance.
It’s always worth remembering why you chose to invest in the first place. Shares are regarded as a long-term (5 years+) investment. Assets such as shares and property have been shown to produce relatively positive returns over the long term, although their prices can be volatile over short periods. The fundamental reasons for your original decision to invest may not have changed.
Maybe it’s not all doom and gloom. You may not know for certain that share prices have hit the bottom yet, but you do know that they are X% cheaper than last week/month/year. Put the market fall into context. A ‘market correction’ usually happens after a sustained period of growth – from which you may benefitted.
Whatever you decide to do, don’t be panicked into stopping saving altogether unless you can’t afford to.
Don’t over react…
If you need to take income, think about all the potential sources you could take it from. Bonds, property and cash savings may be options you could explore while giving your shares time for potential recovery.
As you look ahead, make sure you’re as prepared as you can be for future dips in the market. To help ride out volatile situations, diversifying your portfolio so that you have a good spread of investments across the main asset classes (shares, fixed income, cash, and property) could help with this. If one of the assets in your portfolio does badly, only part of your overall wealth will be affected.
The return on shares and share-based funds comes from two sources: the capital return and the income or dividend return. Drawing only the income or dividends from these investments means the capital remains invested, so any future recovery (or movement in the opposite direction) will influence the value.
Creating a rainy day fund is something to think seriously about – especially if you have benefited from a long bull run (upward movement) in the value of shares. Some people choose to hold at least a year’s worth of income in cash – although not everyone will be in a position to do this.
While staying the course might sound boring to you, it is likely the absolute best thing to do right now. Despite this widespread knowledge, retirees often overreact when the market drops and divest some of their equities. One way to minimize this harmful financial behaviour is to listen to your Financial Advisor. One of the great benefits of having a Financial Advisor is to steady your emotions during volatile markets.
Keeping Calm During Stock Market Corrections
The closer you are to retirement, the more worried you may have been about the stock market’s recent fluctuations. This volatility illustrates the importance of matching your investments with your risk tolerance and investing time frame, especially as you get closer to retirement. Here are answers to key questions about dealing with market volatility. So, although we don’t want to spread any messages of impending doom, it always makes sense to prepare for the worst and hope for the best.
The opinions expressed within this article/communication are those of the Financial Advisor and are not necessarily those of Keybase Financial Group Inc. Any data provided is for illustration purposes only. Clients and prospective clients should always read a product prospectus and fully understand all of the risks associated with the product before purchasing. Any information relating to the discussion of taxation issues is considered to be only general in nature. Clients should seek a qualified tax professional to discuss their specific tax requirements. Keybase Financial Group Inc. is a member of the MFDA and is a member of the MFDA IPC.