Advisers say investors shouldn’t panic about falling stock prices
As new fears of what to expect next out of the stock market surfaced Wednesday, experts attribute major indexes down around the world to tanking oil prices and fears about impact of growth, but local advisers here say investors shouldn’t panic just yet.
In an industry where the numbers constantly change until the closing bell, financial experts say to make sure your emotions don’t mimic the roller coaster of the market. Perspective, they say, is key.
“The trick to the whole situation is they can’t allow those emotions to make them react inappropriately. They get out of investments that have performed poorly just at the time they are ready to recover. They chase things that have done well, they get frightened out of things when there is economic turmoil and the history of things is that there has always been a crisis,” said Christopher Rich, owner of EnRich Financial Partners.
“Either they do nothing and just ride the cycle or they get out and if you look at long-term successful investors they either do nothing or add to their portfolios,” he said.
U.S. stocks recovered much of the early plunge, but the price of oil suffered its worst one-day drop since September.
Even with declining numbers, Rich said investors of all ages can survive the turbulence of the market. If you’re a millennial, Rich said it’s a good time to invest and for those who are working toward retirement he suggests waiting for the market to bounce back.
“People that have more than 10 years from retirement should just ride it out as you buy more shares when the price is low and fewer shares when the price is high, assuming markets recover which they have historically. You can assume overtime you can outperform the market,” he said.
Those who are retired will be the most emotionally impacted by the roller coaster ride, but Rich said not all is lost.
“You just make sure you take a reasonable distribution rate so you don’t run out of money and have sustainability. You rebalance appropriately so you can pick up more shares when prices are down and if things get really bad perhaps you only take money out of your bonds or cash component and allow the stocks to recover,” Rich said.
The real risk in the current market climate, Rich said may be not taking a risk at all.
“All of us want to have high returns with no fluctuation for capital and that’s a myth. It doesn’t exist. The premium returns that stocks have delivered are because of the volatility and uncertainty,” Rich said.