The market keeps on rolling along positively.  Predicting the movement of the market up or down is a tricky job. Some weeks the market is up and some weeks the market is down; some years the market is up and some years the market is down.  People often get complacent and even a little greedy when the market is continually up, so I want to focus this quarterly letter on how to react when the market goes down.         

A future market correction is always on the horizon. We are not sure when it will happen, but as in past history it will happen again. The television and radio prognosticators will give all sorts of reasons why the market drops. For instance, in the late 1980’s they said it was interest rates, in the early 2000’s they said it was the dotcom bust and then in 2008 & 2009 they said it was the crash of the financial system due to bad mortgages. Whatever the reason may be, there is always a trigger to a market downturn. I am not sure what it will be next, but if we prepare for it now, the fear associated with it should not cause you to take drastic measures.

The first thing to do when you start to see the market go down is understand that it is part of a normal cycle. We recommend keeping enough liquid cash available in your accounts to cover immediate expenses; this includes money in checking and/or savings accounts or short-term CDs.  Review your sources of monthly income and make sure they are stable. If your income is coming from a pension or social security, you should be good. If your income is coming from a job, ask yourself if your job is secure? And if you lost your job or if the amount of your paycheck is reduced, how would you live?

The last thing to do is review your investments. We want to make sure your accounts have investments allocated to different time frames. Your short-term category should be made up of investments you will use within the next 2 years and invested conservatively. Your mid-term category should include investments that will fluctuate a bit, but will be used within 2-6 years.  Lastly, your long-term investments should grow over time and be used to replenish your short-term and mid-term investments.  

Being aware of market movement up and down is a good strategy.  Please call our office at any time to schedule a financial review.  We want you to understand and feel comfortable with the direction and allocation of your accounts.