Last week I witnessed a stock market that reached a record correction with a decline of 12%. Uch. It’s like pushing a toe in the middle of the night. I didn’t see him coming and it hurts. Our reaction is to turn to the light. If we saw it, it would make things a little easier, knowing which way to go.
But where are we going? And how do we protect ourselves in the future?
It is important to emphasize that, although we feel bad, the markets have not done anything wrong. However, in fact, market corrections are healthy. In fact, it helps us get back to middle ground. The timing for all this gives us unique investment opportunities, allowing us, as investors, to buy companies at a less expensive price.
How should I invest if I can’t cope with the market recession?
The direct answer, do not be afraid when the market becomes volatile. This is the admission price when you invest in the market!
If last week made you nervous, you lost sleep or you were just sick of it, you probably have too much risk in your portfolio.
Consider this week’s rebound as a great opportunity to rebalance your allocations, reducing your risk. It can also be a great time to take some of your profits, add short market hedges, and raise some money.
How much should you take the investment risk when you retire?
For a start, look at the level of risk. As a retiree or retiree, you may want to consider 40% bonds and 60% shares. Of course, these numbers are adjustable based on your individual plan.
How do you know if this is right for you? Return to the retirement plan. If you don’t have one, start now.
Tip: Your pension and investment plan will need to change when the market changes. Stay away from amateur financial advisors who are focused on a cookie-cutter approach. Words buy it too I’m not what you want to hear! There is a better way! But a retirement plan is a must.
Second, examine the risk of succession. What is that? A number of profitability risks analyze the risk of a fund withdrawing, especially for retirees who make withdrawals during a bear market.
It is more than a rate of return or the amount of a loss. This is a calculation of retirement retirement + timing + market conditions to determine whether or not you will run out of money.
If you are retired in the distribution phase of life, the focus should be on your retirement income, NOT your rate of return. Therefore, as mentioned earlier, you may want to start a conversation with your advisor about your market exposure and income investment exposure.
Shares are risky, bonds pay too little. Do I still invest in stocks?
The short answer is yes. It is wise to have exposure to stocks in your overall portfolio. Statistically, people live longer and, over time, more opportunities to make high profits will help them a lot in their retirement years.
For example, if you look at funds with target data in retirement plans, they respond by maintaining high amounts of shares until at least the first part of the retirement years.
You can determine the amount of risk you are comfortable with by conducting a risk assessment. By doing so, you can get a good picture of what a 10%, 15% and 20% market decline in your portfolio will look like to help you determine what you feel comfortable with and how much you should keep in stock.
What about Bonds?
Let’s talk about bonds. Currently, they offer low interest rates, however, when interest rates rise, the stock market tends to react negatively. As we see the Federal Reserve begin to raise rates, it needs to do so, but not so fast as to limit economic growth.
In the last week, the 10-year treasury bond rose to 2.9%. At present, this rate seems to be ours BANG point where the stock market does funny things. So, as the Fed has indicated raising rates to keep inflation under control in 2018, it may need to reconsider its plan to continue economic growth.
If interest rates continue to rise and the Fed continues to reduce the decline in the purchase of outstanding bonds, we could see an upward trend starting with bonds.
Where the tire meets the road
Even if the market has stalled in the last week, I advise you not to sell everything and put them in cash. Rather; use the current rally to reduce and rebalance your portfolio risk, adjust these hedges as needed, and easily raise (not all) cash positions.
Also, stay diligent and aware of market conditions (use 5-minute Market Update or real-time updates), but always remember that bull markets will come to an end. The prudent strategy is always to manage risk and ensure that your long-term retirement goals remain stable.