When your personal computer freezes, you usually reset it. Maybe this is what happened last month as the industrial average of Dow Jones decreased to more than 1,000 points, finishing down to about 588 points.
For those who haven’t seen a major market downturn before, this might seem very frightening. In fact, some investors panicked and sold their shares because they feared they’d lose much.
The CEO of Longbow Asset Management in Tulsa, Jake Dollarhide along with other financial analysts predict that the market will be volatile through the end of the year, as investors are swayed by the problems in China, as well as the Middle East, and the slow economic growth in the US and also the direction of the interest rates.
According to several experts, on the other hand, these downswings would create even more opportunities for investors to purchase stocks at good prices.
Jim Huntzinger, BOK Financial’s chief economist, said, “I know volatility is upsetting, but at the end of the day, that’s where you find more opportunities.”
Some analysts suggest that your portfolio should be made up of local stocks. Not only will you support local brands but it is a lot easier to track compared to other stocks. According to these analysts, you might know someone who works from these local brands who will give you a general idea on how the company is doing. Or, since it is just near you, take a look around the company first before you invest on their stocks.
Fred Russell, the owner of Frederic E. Russell Investment Management in Tulsa, warns, “Before you buy, though, make sure you have the stomach for more volatility and a long-range horizon.”
It is important to note that investing in stocks and retirement should be two separate things on your financial plans. This is primarily because the stock market is unstable. Thus, you do not want to invest all your retirement funds on the stocks.
The chief financial analyst for Bankrate.com, Greg McBride, suggests that, “You need to have at least 40 percent to 50 percent of your retirement fund in stocks.”
McBride notes that retirement is not a reason to cash out on your stocks.
Furthermore, McBride added, “If you have a well-diversified portfolio, retirement is a lot like driving a car onto the interstate. You just keep going with your eye on the road, maintaining your speed and making only small course corrections.”
He said that people should be realistic enough when determining the amount of money they need when they retire. According to a poll conducted by Bankrate.com, about 37% of older Americans said that they were spending more in retirement than they imagined they would.
This is primarily the reason why most financial advisers think that people should maintain a stock portfolio up until their retirement years in order to be ahead of inflation and generate enough money.
McBride said, “Dividend-paying stocks are a good idea for retirees. They will throw off cash people can live on, and the rate can go up over time.”