Since the market has been down now for a while, which really started back last year in 2022, I wanted to talk for a moment about what do you do during a down market?
It’s tough. It’s hard. Nobody likes to see their account losing money and nobody likes to see the economy turn south, you know, cause up to about 2021, it was boom time and everything was was great. But usually those great times do start to simmer and come to an end, which gives the economy a chance to reset. But what do you do now during the down market?
Well, there’s about four or five, six different things that I would like to suggest. Number one, don’t get emotional. Don’t let the down market get you to a point where you make emotional decisions. You start selling stocks at the at a down point. You start making decisions where you’re just not thinking clearly because you’re kind of, you know, just revved up because you’ve seen such losses.
And it’s very easy to do. And that’s part of a financial advisers job as well, is to help you manage those emotions. But first and foremost, don’t get emotional. Don’t watch the markets closely. Turn that off the TV, turn off CNBC. You know, don’t go to the financial websites because typically they’re doom and gloom. And doom and gloom sells, so to speak.
So we would encourage you to just turn things off for a while. Third thing you can do is be a little cautious. It’s okay to be cautious. It’s okay to take a little bit of a step back and reassess and and think about how you would like to proceed forward. But don’t make abrupt changes in your financial situation or with investment decisions.
Just kind of go easy, watch for a while, be cautious and and you kind of get a feel for for how to proceed. Sometimes it is a great opportunity to take tax losses. So if you’ve if certain assets have reduced in value from the time you bought them, let’s say you bought a stock back in late 2021 and it has a loss right now, you could take those losses, sell that asset, take the losses and use that losses to offset future gains in the market.
So if something goes up in value, you could sell that asset, take the gain, and it could be offset by any losses that you realized. It’s also a great opportunity to rebalance the portfolio. And I’ve talked about cautiousness, but rebalancing decent. Flynn to your investment process. What it does is it kind of forces selling of those things that have gone up in value and buying those things that have gone down in value to keep your allocation levels the same.
So rebalancing can be a very good healthy thing to do. Sometimes it’s hard to buy things that aren’t in favor when the markets are going up, but it adds the discipline that we think is so important on an ongoing basis. By all means, stay invested and keep investing, because what you’re doing now is you’re buying everything on sale.
And after this reset occurs and we’re through a recessionary period or whatever it is we might be faced with, we’re on to a new cycle of the market. So stay invested, keep investing, and don’t get emotional. Click video below for more commentary.