What To Do? Depends On Your Needs

By | March 15, 2024

So the market is up a bunch in the past year, what should you do? Here are my answers:

You are retired and drawing upon your savings

You should probably already have a balanced portfolio that can weather ups and downs. Not too much in bonds, not too much in stocks, but not so little in either that your draw is more than your growth.

You are within 5 years of retirement

You probably should be moving in the direction of a balanced portfolio as described above.

You are more than 5 years from retiring and do not need your retirement savings for anything

My answer for this one is that you should have mainly stocks, and names and or ETFs that will grow like crazy given time. You should be willing to ignore the ups and downs as long as the fundamentals of what you have continue to look good. Volatility can be your friend if you can stomach the roller coaster ride.

I own both growth stocks and growth ETFs to reduce risk… meaning the chance that I will take a permanent loss on my holdings. That usually will only happen if you sell in a down market, although individual names could possibly go out of business. That’s why you hold a basket of several stocks.

The chance of a stagnant market

There is a chance that the market will go nowhere for several years… I do realize that. We haven’t seen that happen in the last 30 years but it could happen. Kind of like the idea that houses will never lose value… that happened just 15 years ago.

Keep in mind that the bad thing will happen. So if you hitch your wagon to a star, that star could possibly burn out. So it’s a good idea to think about that things that will make a trade do the opposite of what you’re expecting.

I have done a little money management for others and I realize that people have different goals. I bought bonds for a retired person just to watch bond prices tank when interest rates went up. So it’s a good idea to hold some stock in spite of the fact that you only want steady income.

I’ve also managed excess cash flow for a corporation which can be a similar challenge. The corp doesn’t need the money at all today or tomorrow, but could need a lot of it all at once in the future. That means that the fund must be liquid in some way.

If you are a 20 something just getting started with your own retirement savings, know that if you don’t have to touch the money and you can handle it, being aggressive with your investments is the absolute best way to go.

None of this changes because of the market being up or being down. Sell and you may miss out on another year of gains. Buy and you might weather a downturn with new money. My favorite thing to do when the market is up is to buy fixed interest investments for a while but not to touch my existing investments. Guess that can’t hurt a ton.

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