If You're Worried.

If the markets have you a bit more worried right now then I'm going to reprint part of of what I wrote in two posts earlier this year.  The 1st excerpt is from "What Do We Need to Accept About the Market in 2018":

Accept that things may have changed.  Accept that there's a higher probability that stocks are not going to go straight up like we saw last year.  Accept that there's a higher probability of more volatility and that stocks may have seen there highs if not for the year then at least for some period of time back in January.  Accept that consolidation of gains is part of the process and just because we are not going up right now doesn't necessarily mean the bull market is over for stocks.  Learn to live with days where the major indices can drop 2-3%.  Again understand this is part of the process and the press will play this up.  A 500 point drop or even a 1,000 point drop today in the Dow Jones Industrial Average* gets a lot of headlines but doesn't mean what it once did in terms of percentage gains or losses.

Accept that you could take a look at your portfolio some time this year and see it down 10-15% or perhaps even more.  A 10-15% decline is historically what has been considered normal volatility for stocks.  It's been so long since we've seen that sort of drop that investors could easily be spooked if it should return or if we see something worse.  A decline of that magnitude would not necessarily mean the bull market is over or that we are necessarily going to see a larger drop in stocks.  Like everything else it would need to be viewed in the context of how it occurred.  Just know this is possible and a much more probable event given the current trading environment.

Accept that things may be changing in terms of market leadership.  We may not know if that's the case for many months.  If so then there should be time to address such a change unless we get some unexpected event over the transom.

Use market volatility to your advantage to either rebalance or reposition your portfolio if necessary.

Know what you own or how your portfolio is set up.  If the current volatility and more corrective conditions are keeping you up at night then you need to review your current risk/reward criteria.  If you're one of my clients then we need to discuss this.  If not, then talk to your financial advisor.  If you don't use one then honestly look yourself in the mirror or hire me!

Finally I would also say that you should take care that you're comfortable with where you have money invested that you might need in the next 6-18 months.  Choppy markets have a habit of seeing the most volatility when you might need the money the most.  For example, if you have a child entering college this fall and you've been able to save enough to pay for your share of the bill, then you might want to make sure that at least the first semester's tuition is invested in something right now that won't necessarily be subject to a market correction.  Of course this is an example and the situation will vary according to each person's needs.  An easy way to evaluate this is ask yourself in terms of money you might need in the short term what hurts more.  Would it bother you more to miss a 10% move up with money you might need soon or would the opposite hurt most?  If losing that 10% stings the most then think about getting more defensive with that money.

The 2nd is from something I wrote back at the beginning of the year as part of my winter letter to clients:

Given how far we’ve come it’s reasonable to ask clients if anything has changed. The easiest way to start is with this exercise:  Open your end of year account statements, or your January statements assuming this rally holds into the end of the month.  Take that account value and lop off 10%.  Assume that is the minimum amount you could see your assets decline at some point in the next 12-18 months.  If your account is worth $200,000 assume it could be worth $180,000.  If it’s worth a million then assume at some point you see at a minimum $900,000.  Remember again, this is what is considered normal in even a bull market!  These may be hard numbers to look at for some if these could cause you to have trouble sleeping at night then we should talk.  I of course do not know when the next decline might occur.  Perhaps it has already started or we may still need to see much more of this advance before prices move lower, just know that it will come just like winter is a season, and then it will likely pass into spring.

If you're worried give us a call.  If you're not a client give us a call anyway.  Sometimes a 2nd opinion can't hurt.  Hope all of this helps if you're feeling a little anxious about things.  

*Long ETFs related to the S&P 500 in client and personal accounts.