Stocks – Is It 2008 Again? 3 Things To Do In Today’s Market

Are stocks a bargain right now?

Those who have children or have been a child are familiar with questions from the back seat on a long car trip, “are we there yet?” Many of us feel the same in regard to the stock market’s recent and abrupt decline so far this year. Are we there yet…at or near the low?

As we outlined in “Advice for 2016 – Reduce Risk,” we may well be in a year where we need to focus on the return of your money rather than the return on your money. For our client newsletter at year end, the title was “Going Nowhere But Getting There Fast.” We discussed the volatility that seemed to be on the increase, with sharp ups and downs. Unfortunately we have been going primarily down so far this year, and getting there fast.

Sellers were back in the market Friday as Wall Street weighed a weaker-than-expected January jobs report.

The Nasdaq slumped 3.2%, the S&P 500 gave up 1.9% and the Dow Jones industrial average fell 1.3%. Preliminary data showed NYSE volume coming in lower than Thursday’s levels. Nasdaq volume rose a bit. For the week, the Nasdaq lost 5.4%, the S&P 500 fell 3.1%, the Dow gave up 1.6%.

3 Things to Do In Today’s Market

The key question is what to do in these types of markets. Here are some thoughts that should help:

  1. Get Back to Basics.
    • Have a plan, be it financial, investment or both, If you don’t have one, spend some time putting one together. If you are doing it yourself, one place to go is “How to Create an Investment Plan” to get started. If you are seeking professional help, we recommend a member of the Garrett Planning Network.
    • Once you have a plan, it’s time to take a look and compare where you are now with where you should be on your plan.
  2. Have the right Balance – Make sure you understand how much RISK is in your portfolio.
    • Remember the market is always going to go up and down.
    • Make an assessment of where you are right now.
    • As we wrote over a year ago in BALANCED INVESTING IS PART OF A BALANCED LIFE, it’s very important to give your overall investments a risk assessment.
    • After you have a general idea of what your Asset Allocation is, see if it matches your attitude toward risk. Consider how many more years you have to save and invest toward your goals. Obviously the shorter the time period, the less risk and exposure to stocks you should have. Make sure you have the right balance.
  3. Don’t Panic!
    • I’m reminded of a quote from the renowned investor, Peter Lynch: “The key to making money in stocks is not to get scared out of them.”
    • Shut off the television and financial websites. The pundits are out in force writing the epitaph of the market, the economy, and are encouraging panic. The “noise” always goes up during extreme times.
    • Speaking of extremes, check out the CNN Money Fear & Greed Index. CNN uses 7 factors and each factor is weighted to calculated the weight average of what it defines as greed and fear on a scale between 0 – 100. These factors include:
      • -Market momentum
        -Market volatility
        -Put & call options
        -Stock price breadth
        -Stock price strength
        -Junk bond demand
    • Not surprisingly the Fear & Greed Index now shows Extreme Fear. This is where it was recently:

  • Just how bad is it? The index has a 100 point scale — with 0 indicating nightmare level fear and 100 signaling “buy everything in sight” greed. Yesterday the Fear & Greed Index fell to 18, and likely went below that after today. While an imperfect measurement, clearly we may be closing in on an opportunity…certainly not a time to panic.

We’re encouraging people to take a deep breath, look at the bigger picture, and not be overly concerned about a week or a month or two. Be intentional about investing. You will find it removes much of the stress you may be feeling after a week like this.

If you have a trusted advisor, touch base with them to take a look at how much sensitivity your portfolios have to market risk. If you don’t, give us a call – we’ll take a quick look under the investment hood and let you know at no charge. You can also schedule a free 15 minute phone conference by clicking this LINK and schedule a time. We’re here to help.

“It doesn’t take a fortune to build one”

About Charles Roberts, CFP®

Founder & CEO, Financial Freedom Planners™
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