Things to Consider When Answering the Question: “I am getting worried. . .should I sell?”

Posted by dfederman on Jul 15, 2011 in Investor Education | Comments Off

Personal Financial Circumstances – Do you have adequate cash reserves? Are you still working? Do you depend on your investments for income?
Asset Allocation - If you’re entirely invested in stocks or real estate, with little or no cash reserves, you are exposed to market risk and may not have the liquidity you need. Consider adjusting your asset allocation.
Stock Market - The stock market moves fast. As an example, between June 1st and 23rd, 2011, the Dow Jones Industrial Average fell 5.5%, then rebounded 4.5% in the last week; most of the move occurring in 4 consecutive trading days. Stocks are supposed to be long-term in nature. Today’s news story of the day should not have an impact on your investment decisions for a 10+ year time horizon.
Behavior - Investor Behavior (not investment returns) is the #1 Most Important factor in lifetime investment outcomes. . .It is human nature to want to sell when fearful and want to buy when “greedy.” If properly diversified, it is better to stay the course, avoid big bets, maintain proper allocation according to your personal needs, goals, and risk tolerance, and rebalance as needed.