Keeping calm when the market is anything but

submitted by Sharon Brewer

2017 was a year of consistent stock market growth with the Dow Jones jumping 25 percent, the S&P 500 climbing 19 percent and the Nasdaq soaring 28 percent. 2018, however, has apparently traded that steady uptick for something more akin to a rollercoaster. In early February, the DJIA dropped over 1,000 points twice in just a few days. Later in March, it surged back up by 669 points. If you’re like most of us, you’re stressed by this volatility and might be tempted to swap those index funds for a high-yield certificate of deposit.  Here’s why you shouldn’t. 

Because the market always wins  

Maybe not today. Maybe not tomorrow. Maybe not even this year. But from 1926 through 2015, the average annual return for the S&P 500 was 10 percent. Name one CD or trustworthy bond that can offer the same – we dare you. 

But what if you’re nearing retirement? 

That statistic might be comforting to a young investor who won’t be retiring for at least 35 years, but what are you supposed to do if 62 is coming up fast and the market is trending down? Step one is not panicking. Remember, if you withdraw money from your 401k before you reach 59 1/2 , you’ll be taxed an additional 10 percent on top of the federal and state income tax. Instead, adjust to a more conservative position. If the market rebounds, you might miss out on the returns, but the peace-of-mind is often more valuable. 

Diversify your asset portfolio 

For most of us, the numbers themselves matter less than what they represent ­– the promise of financial freedom and a bigger, better future. And one of the best ways to protect that future from uncertainty is through diversification. But should your stock-to-bond ratio look like? While most experts agree that the “100 minus your age” rule is outdated, “120 minus your age” isn’t a bad place to start. So, if you’re 50, consider a 70-30 ratio. But don’t just trust an adage. Talk to someone who can find the mix of risk and return that’s right for you. 

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Above all, just think it through before making a rash decision. And if you’re having a difficult time going it alone, consult with a financial expert who can help you navigate the choppy water. 

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