Slight turbulence to be expected
If you watch the business news channels, you’ve seen a lot of ups and downs in the stock market to kick off 2015. It seems everyone has an opinion on why the market fluctuates, and that opinion changes on a daily basis. Questions abound:
- How could the market be down 1.5%?
- Is it the drop in oil prices causing a fall from the possible loss of US production?
- Why is the market racing ahead 1.5% today?
- Is the drop in oil prices increasing consumer confidence, because people have a greater amount of discretionary spending cash?
The answer is: There are myriad reasons why the market moves up and down day today. Whether the opinions you hear in the media are accurate is debatable.
The real question you should ask yourself is: What do the day-to-day fluctuations mean to my investments? The answer to that question has to do with how your money is invested. If your goal is to have quality investments that have the potential to grow over a period of 3 to 5 years, then the day-to-day movements of the stock market are just noise. It is turbulence you fly through on the way to your destination. Turbulence in the air can make anyone nervous, but if you talk to the pilot, he will tell you, it’s a part of flying. This turbulence does not threaten the safety of the trip if you fly the plane keeping in mind the goal is to land safely at the intended destination.
In contrast, if the pilot is flying near mountains or through canyons making high-risk maneuvers, a little turbulence could endanger the safety of the flight. The possibility of reaching the destination faster may exist, but the possibility of crashing and burning is also a very real possibility.
So, what does this mean for your investments? If you are invested prudently with quality assets and with your future goal in mind, then the opinions, the noise, the turbulence, is just that, a few bumps along the way to your destination. If you are taking risks, to go more quickly to where you want to be, then the turbulence could endanger the trip. If a risk is taken to get higher returns, the risk of incurring greater losses also exists. Understanding risk and managing it properly to achieve a retirement goal can allow you to turn off the television because you’ll be confident that the day to day noise is just that — noise.
Let us know how we can help you better understand the risk you are taking with your retirement savings by contacting our office at (904) 273-9850.