Earlier this week we saw the NASDAQ take a dive and Facebook lost 5% in one day. Volatility is part of the stock market. That’s how it’s been and I think that’s how it’s always going to be. Suffice it to say that the stock market is otherwise unpredictable and it’s something that investors are aware of. But who really needs to worry about the stock market?
Who needs to worry?
The complicated answer is, it depends. It depends on what you’re saving for, how old you are, and your time horizon.
Generally speaking, if you’re saving for retirement, the people closer to retirement need to pay attention to the market more than the younger people. That’s also why asset allocation is important. The closer you are to retirement, the more money you should have in less risky investments.
Time Horizon
If you have a short-term goal you’re saving for then you have to be a little more careful. If you’re saving for college, for example, the closer you get to having to use those funds to pay for college, the more conservative you’ll have to be.
What happens in the stock market only concerns people with a short time horizon. I actually should phrase it differently. What happens in the stock market SHOULD only concern people with a short time horizon.
Asset Allocation
When I say all of these things, I’m specifically talking about broad-based financial planning. People who are saving for a particular goal and are using asset allocation for their investments. Meaning they’re selecting mutual funds or ETFs that follow some sort of index. If you’re investing in specific stocks or thematic ETFs, then you probably have to pay a little more attention.
And I’m not saying that people with long-term time horizons shouldn’t pay attention to their accounts. I’m simply saying that they shouldn’t live and die on what the value of their account is day in and day out. Don’t worry about the stock market.
Related reading:
What Currently Present a Risk to Markets?
Why Financial Literacy is Important
Disclaimer:
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Jacob Sensible is a financial advisor with decades of experience in the financial planning industry. His journey into finance began out of necessity, stepping up to support his grandfather during a health crisis. This period not only grounded him in the essentials of stock analysis, investment strategies, and the critical roles of insurance and trusts in asset preservation but also instilled a comprehensive understanding of financial markets and wealth management. Jacob can be reached at: jake.sensiba@mygfpartner.com.
What im worried about is the I bond rate will increase will be a great time for everyone to get a great interest rate finally!! The inflation report isn’t going to be pretty thats for sure.