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Why advisers say ‘stay the course’ in a wild stock market

No need for stock market ups and downs

No need for stock market ups and downs to unsettle you; just make a plan and stick to it. Credit: Getty Images / iStockphoto / phongphan5922

The stock market volatility of the past couple of weeks has kept some investors awake at night.

Forget the tossing, turning and debating whether you should make major changes in your portfolio.

For investors who have matched their investments to their goals, the answer is to tune out the noise, turn off the light and go to sleep. Perhaps you’ll be more inclined to do that if you understand why you should stay the course.

  • Think long term

“Making allocation changes during volatile periods will be driven by fear, not rational long-term investment decisions driven by a clear investment plan and strategy,” says James Lubin, CEO of Beacon Hill Private Wealth Management in Woodbury.

Translation: you’re likely to make bad snap decisions after a market drop. If you run scared, at some point you’ll be faced with figuring out when to jump back in.

Good luck with that.

“Do not attempt to time the market. Such an investment strategy is a fool’s game, most often met with limited success,” Lubin says.

  • Know this is normal

Market corrections are an expected part of stock market behavior that tend to occur every two years, and only twice in the past 10 years have they been preludes for larger downturns, says professor Dave Littell, co-director of the Retirement Income Program at The American College of Financial Services in Bryn Mawr, Pennsylvania.

“The market is still up 20 percent from last year. Don’t panic and risk overcorrecting, especially if you’re not near retirement age,” he said.

  • What if I’m about to retire?

Make a plan, and then relax.

“If I’m working with a client that’s within two years from retirement we’ve already accounted for any kind of choppiness and already put a decent amount of money in short-term treasuries to cover at least two years’ worth of retirement income,” says Charles Massimo, CEO of CJM Wealth Management in Deer Park. “Our goal there is to make sure that volatility does not impact our client’s income in the first year or two during retirement.”

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