*This blog post is my personal opinion only and contains affiliate/referral links.
So it’s been said that the more volatile the markets, the more you monitor the daily and sometimes hourly performance of your stock portfolio. What does it say to an investor if he/she is giddy and most likely selling and/or changing his investments as dictated by the fluctuating market?
If you “frequently” do this, then you are guilty of timing the market. There is a reason i open and close parenthesis the word “frequently” because i believe there is a right time to evaluate and change your investment.
The question of WHEN can be answered by asking yourself these two important questions:
What is your time horizon? You can afford to be risky if you have 10 or more years of working before retirement. I say 10, instead of 5, because you have more leeway to plan and strategize your money moves before the next stage of your non-working life.
Whether individual stocks, mutual funds, ETFs, real estate and other vehicle of investments, you have ample time to withstand the losses if you have a longer horizon. Historically, you can take the bump during the down economy and recover when the market peaks up again.
Do you have financial cushion? Granting your job takes its turn for the worst because of the effect of economic downturn, then it’s not really financially smart to continue the investment bleeding. I would not recommend completely pulling it all out, but i think it would be for the best if you let it sit on a conservative to moderate portfolio.
If you are holding highly aggressive stocks and you only have one primary job that fully support you and your family, you should think twice and protect the bulk of your investment as you wait for the market to bounce back.
The last sentence may or may not be based on the premise that what is left of your investment will most likely be your safety net or emergency fund. On the other hand, if you feel your job is safe, your continuous contribution to your investment will cushion the losses and give you a better and robust fighting chance to regain and even exceed your previous earnings.
Remember to be mindful of how stable is your source or sources of income. The flow of spending money should flow continuously, regardless of whether you have a job or not.