Volatile Markets

Watching your investment portfolio fall in value is never fun. You and I both wish we had a crystal ball to answer questions like: How long will it last? Is it a good time to buy or shift assets to stocks? How will this impact my retirement plans? Is the best course of action to stay on track?

A historic look at the stock market shows a majority of years with positive returns. Data from accounts that regularly move money in and out of the markets offer evidence that unless the timing is perfect, the account holder is likely to miss periods of growth and/or sell investments at a time that turns out to be less than ideal. With that in mind, in most situations it is good advice to “stay the course”. Based on history, it is appropriate to feel confident that when an account has an ample time frame, recovery does occur after dips.

One action to consider at this time would be to look at your overall balance and distribution of assets. If the current markets are making you feel really uncomfortable, it could be a sign your risk tolerance does not matched your allocations; if so, you can develop a plan to revise your allocations and re-balance your portfolio.

The Secure Act changed required minimum distributions (RMD) rules, allowing individuals to wait until age 72. It is a silver lining for some retirees, allowing recovery time for investments before the first withdrawal is required.

The drop in stock values is also a positive for individuals who have planned Roth conversions. Moving investments at low value will result in lower taxes for the distributions and result in upside growth in a non-taxable account.

Turning the current volatile economic situation into an opportunity to learn more about your finances is also a positive action step. Evaluating your spending and savings habits can lead to reduction of debt, building an emergency fund, and keeping your finances on track.

Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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