Marin Mommies is presents another great guest article by Marin mom and financial planner Katy Song, CFP®.
On August 8, 2011, the S&P lost 6.7% of its value, and most investors are still suffering from whiplash caused by the market’s ups and downs last week. Whether you watched your portfolio plummet, saw the drop as a good time to buy, or sat on the sidelines stunned, I have some advice… take a deep breath and exhale slowly. This is going to be a marathon, not a sprint.
It seems like every time a piece of economic data shows positive signs of a recovery, there is updated “official” economic data saying that the previous quarter is revised downward. Just like the market, if you drop 600 points and go up 400 points the next day, you are still down! So what can you do to better handle this volatility and prepare yourself for a long road ahead? Here are some simple steps:
Know what your money is for. Every account or pot of money you have needs a purpose. If you need it within the next three years, make sure it is liquid. Liquid means that you can quickly and cheaply convert it to cash. While stocks are “liquid”, you run the risk of needing to sell when the market is down.