INVESTORS ENGAGED IN A TEST OF WILLS with the stock market during the sharp declines in March—a test that some failed. They panicked and sold their stock holdings, only to see the market bounce back. Fortunately, unless you’re close to retirement, you should have plenty of time to recover your losses. “Consider it a lesson learned, reallocate and move on,” says Steven Zakelj, a certified financial planner with Flatirons Wealth Management, in Boulder, Colo.
TAKE EMOTION OUT OF THE EQUATION
Don’t compound the damage by trying to figure out the optimal time to rebuild your stock portfolio. “A lot of times people say, ‘I’m going to wait until the dust settles,’ ” says Vinicius Hiratuka, a CFP with Elevated Retirement Financial Services, in Madison, Miss. “The stock market is a leading indicator. When the dust has settled, you’ve missed it.” In fact, the stock market indexes just finished one of the best quarters they have had in years.
Still, reentering the market will require fortitude, because the stock market will likely continue to be volatile. Consider taking emotion out of the equation by dollar-cost averaging your way to your target allocation of stocks, bonds and cash. If you sold $100,000 in stock funds, you might reinvest $25,000 on a specific day each month for four months. Over the long term, the day you invest won’t matter much. What will matter is that you invested.
This story is from the September 2020 edition of Kiplinger's Personal Finance.
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This story is from the September 2020 edition of Kiplinger's Personal Finance.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
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