The market has reached yet another all time high, yet every time we've been here, the same things happen time and time again! What's different this time? What should you expect? What should you do? Mark Lamkin from Lamkin Wealth Management has four things that you should know about your investments and about this market right now.
1. Correction Coming
Every time the market has reach all time highs, we have experienced a correction. A correction is a drop in the stock market of at least 10%. This is a healthy part of the market process as markets don't go straight up. On average, markets drop at least 10% once per year, they drop 15% at least once every 2.5 years, and they drop 20% or more (a bear market) every 4-5 years. This is a normal part of the investing cycle and can be expected. However, timing this is a fool's game, and this is why a well defined financial plan is needed to manage your finances and your investment process.
2. Two Years
Any money that you need in the next two years should be pulled out of the market TODAY! Don't gamble with short term market movements. There's no way to guess short term market moves as market sentiment can change minute by minute. If you know you're going to need funds within the next two years ( and I can make the case for three), then sell the funds today and put them in a bank account or short term bond fund.
3. Bond Bull
Not only is the stock market at all time highs, but the bond market is at a 30 year high, as well. In fact, there may be MORE risk in the bond market. When the bond market corrects, it usually takes a great deal longer to recover than stocks. Bond markets are tied to interest rates which are tied to economic cycles. Therefore, it usually takes many years for bonds to recover. If you own bonds, understand how interest rate movements are going to impact you and which types of bonds will hold up the best and worst.
The stock market has had a really good run the last three years. If a few years ago, you established your allocation at 60% stocks and 40% bonds. But because stocks have had such a large increase, your allocation may be 80% stocks and 20% bonds. If that's the case, you'll be taking more risk that you think. Sell the excess stock positions and place those funds in the right types of bonds.
Lamkin Wealth Management
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