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Heads Up!

August 24, 2015 | Weekly Commentary
  1. Don’t fixate on the news. The more often you update yourself on the market’s fluctuations, the more volatile and risky it will appear to you — even though short, sharp declines of 5% or more are common. Fixating on fluctuations in the short term will make it harder for you to remain focused on your long-term investing goals.
  2. Don’t panic. While stocks are certainly not cheap, they aren’t wildly overpriced, given today’s levels of interest rates and inflation.
  3. Don’t be complacent. You should use the latest turbulence as a pretext to ask yourself honestly whether you are prepared to withstand a much worse decline. Did you lose sleep Friday night or over the weekend worrying about your portfolio value? If so, we need to talk AS SOON AS POSSIBLE
  4. Don’t get hung up on the talk of a “correction.” A correction is typically defined as a decline in price of 10% on a widely followed index like the Dow Jones Industrial Average. The term doesn’t have official status, however. Markets recover from most corrections within 3 or 4 calendar quarters. A market decline of 10% has no real significance in and of itself. What matters is the outlook for the future; that doesn’t depend on whether the market is down 10.2% rather than 9.8% – see a discussion under “HEAT MAP” below for the outlook for the U.S.
  5. Don’t think someone on TV—or me –or anyone else–knows what will happen next. After a market drop, or at any other time, no one knows what the market will do next. Stocks could drop another 10% from here, or another 25% or 50%; they could stay flat; or they could go right back up again. Diversification and patience — and, above all, having a long term plan in place — are your best weapons against this ever present uncertainty. (Source, in part: Wall Street Journal)

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