Your Portfolio Is In The Red Today. What Should You Do?
One thing you will often see on Twitter on the days in which the market is sharply falling is a gif of the scene from The Shining where the elevator doors open up and a flood of red comes out, 99% of the time in jest. I laugh every time.
It is important to not panic or take any one day too seriously when it comes to investing.
What should you do on days like today when the markets are really red?
Don't Panic
It is scary, it is emotional, but the most important thing to do is not panic. Today is not the first day that the markets are way down, it will not be the last. There may even a string of days of big losses. The most important thing to do is not panic.
Notice I said it twice, DON'T PANIC! (Make that three times!)
Make sure that your investments still align with your plan.
Take some to evaluate your portfolio.
Do your investments still match up your Financial Plan and Investment Plan?
Your Financial and Investing Plans should drive every investment decision you make as you save for retirement. If you have solid plans in place, then just follow your strategy. You did your homework, you are investing for the long term, trust the process. Retirement investing is a marathon, not a sprint.
It may be time to check your allocations and adjust the balance in each different type of investment in your portfolio. Maybe the markets are falling because there is some kind of news that changes your outlook on certain types of companies or sectors of investing. If that is the case, it could be time to rotate sectors or kinds of investments in your portfolio.
In the end it might also be everything is still right in line with your Plans. If that is the case, don't do anything. You are right where you need to be, just hold for the time being.
Follow Kenney Rogers Advice!
Know when to hold 'em, and know when to fold 'em.
If you are trading in a brokerage account (outside of your retirement accounts like 401ks, IRAs, etc.) it might be a good change to sell and purposely take some losses. Doing so will allow you use those losses to save on taxes if you sell something else and make money on it.
If you sell a position for a $100 loss, it can offset a $100 gain elsewhere (you can capture up to $3,000/year in losses, the rest you can carry forward towards future years). So if you have one holding that down, another up, it is a chance to get out of the one that is up and not have as large of a capital gains bill at the end of the year. Just be careful and pay attention to wash sale rules which essentially means you can't buy the same stock, fund, or a similar fund (can't sell a healthcare ETF and turn around and buy another similar healthcare ETF), has to be something that is somewhat dissimilar.
An Advisor and/or CPA can help with can help you more on this topic.
Carpe Diem!
If you are a more regular trader, this could be your opportunity to take advantage of some names being oversold. It is very common to see a bunch of investors start to sell off their positions when a stock/fund starts to fall. This could lead to them being sold more and the price being driven down more than they should fall. People are irrational and will panic sell.
When you see that happening, it could be a good time to pick up some securities you like for a nice discount. If you have a position that isn't performing well, or maybe you are ready to take some profit on it then you could free up some cash and buy things on sale. This potentially opens up a lot of upside if you were to choose the right investments.
Think of the old adage: buy low, sell high!
Get Some More Skin In The Game
Down days are great times to invest more! If you have some money that you want to invest with beyond your normal retirement investing, then there is no better time than when prices have fallen. Don't put in money that doesn't fit within your Financial Plan to try and chase quick wins, but if it is extra money or it does fit within your Financial Plan then do it. Maybe it's the IRA contribution you have been putting off? Again, stay within your Plan, but capitalize on opportunities when they present themselves.
Finally...
Don't Panic! Stay calm, understand these days happen. Keep a level head, check your Financial Plan and Investment Plan.
You might be right where you need to be. You might have some nice opportunities in front of you.
Assess the situation and always operate within your Plans.
Don't Have Solid Financial And Investment Plans?
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