The stock market is falling, what should you do? Sit tight and don’t worry. Markets go up and down and will continue to do so. This is part of the normal cycle. Although no one can predict exactly when stock prices will rise or fall, we can say with confidence that they will continue this behavior forever. The reason we can make such good returns on our investments in the good years (Midway’s investments returned an average of 13% in 2016 and 22% in 2017) is that we have to also endure some bad periods. The bright side of lower stock prices is that we can buy more of the investments we want for less money. For long-term investors, that’s a good thing.
Right now is a good time to do your financial housekeeping as you would at the beginning of any year:
1. Rebalance your 401(k) plan at work. Changes in asset prices last year (both stocks and bonds) may mean your actual allocations for these asset classes have drifted away from your targets.
2. Make sure you have a savings plan for this year and that it is on track. Your contributions to your investment accounts will be worth more when markets eventually go up again, so don’t miss out on buying assets on sale.
3. Maintain your “rainy day” fund (3-6 months of spending) in cash. Money market funds and savings accounts are paying more than 2% annually now, so there are lots of good options for earning money on your cash.