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The thing about investments is that depending on where your money is, things can change pretty dramatically when the market decides to. With the recent market drop we just experienced, some people might be nervous about where they have their money. Here are some ways to decide when it’s time to move your investments, and when it’s time to keep them where they are. Keep in mind that hiring a professional financial adviser to help can be the best move if you are ever unsure.
#1) Know When the Market Change Is Affected By A Big Event
With this most recent drop in the market, there wasn’t any major event that pushed it to do so, so you can generally expect it to come back to where it is usually at. In the past when something happened like the housing market crash in 2007-09, that had repercussions on the entire stock market which is easy to understand…and easy to see why things might not bounce back overnight.
#2) Know When Other Countries Are Changing
Our economy is a global one, so what happens in other countries, especially large ones like China, can really effect us. Currently the market in China seems to be slowing down a bit, which could seem like a big concern for us but might not really be. While a huge drop would be a problem for us, the thing is that it’s also natural for a hugely booming economy to slow down at a certain point because it can’t possibly continue growing at a very fast speed forever.
It can be sort of difficult to keep track of the real numbers anyway, since China suggests that it’s growing at a different rate than we currently think. The biggest change we can expect to see there is that the Chinese economy moves towards a more consumer driven one as opposed to a gigantic exporter as it has been.
#3) Know What’s Happening Here In the U.S.
Naturally what’s happening on our own soil is going to effect our economy and investments as well! These days the unemployment rates are actually going down, which is great news for our market. People are rightly worried about what would happen if the Federal Reserve started raising the interest rates, but in the meantime it seems like things are going in the right direction, so some ups and downs here and there are to be expected and not necessarily an issue.
The recent market drop can actually be seen as a pressure release in a certain way, if you can get over the shock value of the numbers. Generally when the market drop around 10 percent it tends to bounce back up again, as opposed to dropping further. This one just seemed so dramatic because there hasn’t been that big of a drop in a really long time. Paying attention to the history of the financial market is just as important as the current climate. Think of it like your medical history, an asthma attack to someone who is prepared and knowledgeable about the condition is going to have a faster recovery than someone who has trouble breathing with no known cause. Know the facts, and you’ll be able to stress less.
#4) Know What Moves Might Be Smart Ones
You never want to panic and move all of your investments at one time, but it can be good to know which ones make sense to move during different economy conditions. If you’ve been sitting on tons of cash in equities for example, it might be a good time to move some of it. But it isn’t necessarily a good time to divert from your long term strategy and do lots of low buying to sell high later. If anything a slight downturn in the market is a good time to see if there are better stocks or bonds for your money to be in. Not changing the percentages too dramatically, but perhaps changing their position.
Again, it’s always best to check with a professional financial adviser before making any big moves with your money. But staying educated and doing research yourself can help a lot between visits and even when you’re ready to sort through the options that a financial adviser presents you with.
Did the recent market drop make you do a double take? Let us know if this helped to explain why those drops occur and if you plan on making any big changes with your investments!
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