Wednesday, February 3, 2016

Financial Market Instability

If you follow the financial news at all, you know that January 2016 was a pretty poor month in the financial world. Stock markets had all kinds of up and down days, trending more toward down, and there's been all sort of concern over the price of oil and the future of China. It's easy to get caught up in all the fuss.
The S&P 500 index over the last few months. That steep drop around Jan 1 sure made the news.
It's really tempting to react to what goes on in the financial world. When you see headlines screaming about a horrible day on Wall Street, or forecasting doom and gloom because oil prices are crashing, it's easy to think that you need to take some action. Of course, that's the worst time to do anything with your investments. Reacting emotionally to the news of the day is a good way to lose what you've built up over time.

Just about any financial adviser - at least, the ones who actually want to help you - will tell you to make a long term plan and stick to it. That's what I've done, balancing my investments between stocks and bonds, plus a few CDs in case of something catastrophic in the financial markets. Other than occasionally rebalancing the stock/bond ratio, I don't change anything based on what the markets are doing. Putting more money in or taking it out happens when my needs dictate, not based on market changes.

If you follow the news at all, you probably can't avoid hearing about the financial world's latest problems. But that doesn't mean you have to react to it.

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