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How to React to a Market Correction Thumbnail

How to React to a Market Correction

Financial Planning Insights Investing Behavioral Finance Retirement Planning

A correction in the markets is defined as a 10% decline from recent market highs and as of last Friday, the NASDAQ index, which is heavily weighted in tech stocks entered a correction.   And as of today, the S&P 500 is less than a percent away from entering a correction.  Not to worry though, corrections or 10% declines are relatively common and should be expected about every 19 months.  

After coming off a historic bull market that ran from March of 2009 to March of 2020 the volatility we have experienced in the first 3 weeks of 2022 probably seems a bit drastic.  

It’s important during times like this to remind yourself what your investments are intended to do.  For most of us, we want our portfolios to achieve growth and be there for when we need it as income.  Whether you are in growth mode or income mode maintaining discipline is the key.

If you are still working and contributing to your company retirement plan, think of your contributions as buying all those great companies that are in your portfolio at a 10% or more discount.  Keep contributing even if it hurts to see your monthly statement decline a bit.   Those losses are only temporary.   If you have additional cash this may be an opportune time to put it to work. 

If you are retired and using your portfolio for income it may be time to review your cash flows and asset allocation to determine if your current mix is still appropriate for your goals and unique situation.  

Remember that being a disciplined long-term investor is the best way to achieve sustained growth in your portfolio.  Trying to time the market is a losing game.  And frequent check-ins with a professional can help keep you on track to success.  

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