Navigating A Turbulent Market
Navigating A Turbulent Market
Make sure you're diversified
The stock market has been hit hard these first couple of weeks of 2008 and many economists agree that we are likely to experience negative returns for the next six months. This can be a scary time for investors and many get to a breaking point and sell just as the market begins an uptick.
The following three suggestions can help you navigate this difficult period without taking a serious financial hit. This is a good time to make sure your portfolio is anchored in the following prudent strategy:
1) Your portfolio should be well diversified with stocks, bonds and cash. The stock selections or mutual funds should include growth stocks, value stocks and international stocks. There should be no more than 5% of your money in one stock.
2) Down markets offer an excellent opportunity to dollar cost average into the market and keep a long-term perspective. Investors who stay the course during this time will participate in the upside of the market when it turns around. No money should be invested in stocks if you have less than a three-year time horizon.
3) The economy is going through a tough time and we all must exercise caution in our spending. Layoffs will increase and finding a new job will become tougher. This is the time when you should have a savings account with six months worth of expenses in it. Additionally, pay off and don't accumulate debt of any kind at this time. More debt will only add to the stress of your shrinking portfolio and your post-divorce financial situation. This is a time to exercise caution and reserve in your financial life.
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