Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His regular guest post appears here Monday mornings, but filed this entry in light of Monday’s market plunge.
Nobody wants to talk to his or her financial adviser when the market’s humming along. But, man, just one little slide in the Dow of 600 points-plus — like we saw Monday — and everybody wants their money guy on the phone now! That’s completely understandable. In fact, it would be understandable if, after the market performances of Monday and last Thursday, investors wanted to talk to their mommies or even curl up with a favorite stuffed animal. It was scary stuff.
There are lots of reasons to be pessimistic about the economy and the short-term future for the market. But remember this: No one builds wealth buying at peaks. You build wealth buying when there is blood in the streets. (If the S&P downgrade’s still heavy on your mind, see my Monday post.)
If you acquired real estate in 2006 or 2007, for example, chances are it will take more than a decade for you to just break even. But buying property today, and holding it for a decade, will likely make a very positive impact on your net worth.
The same thing goes for investing in your 401(k). Let’s say you’re contributing a few hundred dollars per month to your company’s retirement plan –- the same amount each paycheck. Well, with this paycheck you’re putting in the same amount of money as you did last pay period, but now — if you are invested in a stock-oriented mutual fund — you are buying a full 10 percent more. That’s good old-fashioned “buying low.”
If markets fall another 10 percent, your buying program gets even better: the same companies, at lower prices. It’s like a sale at your favorite store. And, depending on your circumstances, you have years, maybe even decades, for those bargains to regain and expand their value.
What if you are already on the cusp of retirement, or actually in retirement?
Speaking of income, make sure your investment and retirement assets are generating an income, regardless of market direction. Most portfolios should have a mix and balance of dividend-paying stocks, interest-producing bonds and energy-related companies that pay distributions.
It shouldn’t take a “market event” to prompt a conversation with your financial adviser. Stay in touch with the people who manage your assets on a regular basis. Make sure they are up to speed on what’s happening in your life and any needs or concerns you may have about your investments. I guarantee this will help you sleep well at night, regardless of whether the market is soaring or swooning.
So, regardless of how the market ends up today, what’s your investment thinking for the rest of the year?
Does the current market volatility rethink your definition of “long term”?
– By Wes Moss, for Atlanta Bargain Hunter