Despite contributions totaling thousands of dollars so far this year, since January 1, the value of my investment portfolio is down 10%. That’s enough of a decline to make anyone consider giving up on the stock market. It’s an understandable point of view.
My 401(k) offers an automated interview to help you choose your asset allocation. Several questions resolve around the comfortability during losses. When the stock market has been in an upward trend, it’s a lot easier to say you’d be willing to experience a 20% decline over one year. However, during a bear market, those who believe they are suited for aggressive and risky investing are put to the test.
Do you cut your losses? Is it time to reconsider your long-term strategy?
I don’t think so. I’ll be sticking with my plan. If you have several decades to retirement, the stock market should continue its upward trend. In fact, staying the course and buying smartly during a bear market provides the opportunity for bargain-hunting.
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{ 5 comments… read them below or add one }
Ditto. No reason for anyone to change anything, long term investing-wise. I’m sorta/kinda glad it’s happening because my tolerance is being properly tested now. If I can brave this bear market, I know that I can brave my “in-it-for-the-long haul” investing strategy. Not that I’m happy to be losing $ right now but I know that I’ll be fine in the long run.
It may be a good idea to re-evaluate the stocks that are in your portfolio. I have just started My Stock Market Journey and I am learning so much on this adventure. I am currently developing a checklist by which I will measure the stocks that I am considering adding to the portfolio we are building while on this journey.
It may be helpful. You may also want to develop your own set of criteria to measure the performance of your stock and if it does not measure then you’ll have to decide what is best for your situation.
Be well.
Alisa: That’s good advice in general. It makes sense to look at your portfolio at regular intervals (perhaps a year) to be sure that your mix matches your goals. If you’re questioning your portfolio just because you’ve found yourself in a bear market, then either you’re reacting emotionally or your goals weren’t correct to start out with.
I always say that if the stock market generally trends upward over the long term, then it’s never a bad time to buy, as long as you’re in it for the long haul.
I didn’t so much as cut my losses as I recognized some gains although I’m pretty much a long term, dollar cost averaging, leave it and grow it type. But noting the tumble in my fund values at the end of 2007 and beginning of 2008, I started to pay closer attention to my holdings and minding the market (as opposed to complete laissez-faire).
Fearing the worst case scenario (e.g. stock market crash of the depression era type) – I decided to not ride the ship all the way down. Not that I predict it will happen – but just in case – said Chicken Little.
When the DJIA was up to about 12600+ rebounding from the declines in the earlier part of the year, I sold roughly 25-30% of my mutual funds in my rollover IRA . No I did not take a distribution, the money is just sitting in cash, adding to the roughly 10% cash equivalent that was already there. Since I had held these funds for several years I was able to take a good amount of gains.
So now – I will dollar cast average back into the market along with my continued 401(K) contributions – at bargain prices.
Across all my investments (inside and outside retirement accounts) I’ve made an effort to ensure I have diversified across commodities, small-mid-large cap, domestic, international, bond, cash, and select market sectors. I also own one modest real estate investment property which I hope to own outright in 5-6 years.
I’m much more confident that my networth is less correlated to any particular index and is much more “stable” .