"Be fearful when other are greedy and be greedy when others are fearful" is a famous quote from the billionaire investor Warren Buffett. It always amazes me that at the young age of 91, Buffett continues to invest and purchase more stocks. He defies the odds of increasing bond holdings the older he gets. Why, you might ask? He believes in American consumerism. Warren is famous for buying value stocks when he deems they are discounted. It's a great reminder to me that Buffett does not tend to worry about market volatility as he knows that one of the greatest enemies of wealth is inflation. For those that need a quick reminder on the definition of inflation, it simply can be defined as too much money chasing too few of goods.
Inflation can be seen all around us in the cost of food, fuel, housing, and medical expenses just to name a few. With this rising cost, it is more important than ever to stick to a budget, grow your emergency fund, and focus on mid to long-term investment averages in a diversified portfolio. The market has historically been a great inflation fighter that has lifted many people from poverty and living exclusively on social security income.
Things to be thinking about.
- If you are concerned about having money invested that you'll need for income in the next 12 to 24 months, let's have a conversation about that. More than likely we've already talked about this and have this as part of your short-term goals.
- When you see the market go down (and up), understand that your portfolio is diversified and doesn't necessarily move exactly with the broad markets.
- If you own a Traditional IRA (tax deferred) it might make sense to realize the income tax and convert some or all into a Roth IRA while account values are down to realize less taxable income. If you are interested in learning more about this, please reach out to me.
- Consider making your 2022 IRA or Roth IRA contributions. You may want to evaluate your budget to see if you can increase your monthly contributions in your investment accounts.
- Avoid making emotional "knee-jerk" reactions. Remember, when it comes to investing, I believe minor adjustments can make major impacts.
Money is extremely emotional. I'm not immune to the emotions of money even though I've been investing most of my working life. It's normal to be emotional over money; however, logic, facts, and history tend to be a better place to focus your time on when evaluating the markets during times like these.
I tend to find myself having to take a break away from the noise of social media and the news by going for a walk, attending a ballgame, or taking a drive out in the country. What ever your passion or hobby might be, it may be time to dig into it a little more than normal and remember that the market have seen and been through times like we are going through right now. Hopefully, within a short period of time, this too will be a thing of the past and conversations can be had again of opportunities missed and market all-time highs.
The short answer is that no one knows for sure how long this bear market will last, but I am always here to help. Whether it's simply offering an ear to listen, going through historical market data, or offering advice on budgeting and investing. Often times a quick phone conversation can answer some questions you may have and help ease some anxiety. If nothing else, we can catch up on our lives, talk about family, vacations, and the good times to come.