In investing, sometimes the best action is inaction. When an investor is deep in panic mode, and the stomach acids are churning, often the best thing to do is resist the urge to make a reactionary change. Although selling one investment in favor of cash—or a competing investment that just happens to be doing well lately—may help an investor feel that they are taking control back from Mr. Market, those knee-jerk reactions are often harmful to your long-term financial health.
Remember, you are a smart investor with a plan and a long-term focus. You know that the best time to prepare for the sell-off is when times are good, and you did just that. So, what exactly did you do?
Since you prepared for the sell-off when times were good, your portfolio is ready to weather the storm now that times are bad. Yes, your portfolio balance will be down during the sell-off, but not nearly as much as those that did not take the above precautions.
So, what comes next?
Now that the sell-off is underway, you can start to prepare for the recovery. You understand that it is important to position for the recovery when times are bad. Should the sell-off deepen, then:
You may be thinking right now, “I am not sure I prepared when times were good, and I’m not certain how and when to position for the recovery.” Don’t worry, if you are working with a good adviser, they are thinking about and working on these tasks for you.