The stock market is like a temperamental teenager. One moment it is lively, fun and full of future possibilities. The next moment it is grouchy, moody and seemingly capable of ruining the party for everyone. Welcome to the life of the stock market, which has more ups and downs than an amusement park roller coaster. This year, the market has had some good times. However, there have also been some struggles. When the stock market starts to fall, people start talking about a crash that could occur at any moment. A serious financial dip is obviously something that is always a possibility, but right now I can't worry about a stock market crash. Panic helps no one.
When it comes to investing, I do have a timetable for college savings and retirement. By nature I am a bit conservative, which means that I tend to stick with stocks, bonds and cash that are appropriate for the number of years left in my investment plan. When there is the possibility that the market might struggle, I follow the news but do my best to take a long-term approach to investing. In other words, I stick with my plan. I know that doesn't help the person that wants to start making withdrawals in the next couple of years, but my plan is to convert my investments to more conservative vehicles as I approach retirement. This will hopefully help absorb any short-term dips in the market.
Timing the market
Assuming that the market is headed for a sharp dip, how will I know when that might happen? The biggest issue with investing is that timing the market can be incredibly difficult. Again, the market is like a teenager in that investors can be very moody. Earnings (or lack thereof), governmental reports and political news can all send the market up and down very quickly. Of course, there are also times when investors ignore market news and trade in the exact opposite direction. This means that sometimes I have to just make my investing decisions and to a certain extent have faith that I made the right decisions.
What is the alternative?
Again, let us assume that a drop is coming. What is my alternative? Should I pull all my money out and stuff it in my mattress? If I were to pull money out of certain investments, when would I put the money back into the market? I can't assume that everything will just work out. The market can rise and fall very quickly, and vast amounts of money can be lost. However, I will not panic on news of a potential crash. Rash financial decisions are not advised.
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