Dec 9, 201312:17 PMOpen Mic
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100-point market declines aren’t what they once were
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It’s important to understand, however, that these factors are often short-term in nature — and so are their effects on the market. To be a successful long-term investor, you’ll want to examine the fundamentals of any individual investment you’re considering. When looking at a stock, ask these questions: Does the company have a good management team in place? Are its products competitive? Is the stock priced fairly, relative to its earnings? When evaluating a bond, make sure it’s considered “investment grade” by one of the major bond-rating agencies. And when looking at a mutual fund, examine its stated objectives, its track record in all different economic environments, its level of diversification, and other key factors.
If you’ve chosen quality investments, possibly with the assistance of an experienced financial professional, and these investments are suitable for your risk tolerance and time horizon, you really shouldn’t have to worry about market declines. In fact, although it may sound counterintuitive, you might even welcome these periodic downturns. For one thing, they will give you a chance to see how your investments respond in different market environments. Also, a declining market may well give you the opportunity to purchase quality investments at lower prices — again, the “buy low” principle is worth considering.
By having confidence in your choice of investments, and by being prepared to take advantage of the possibilities presented in a market downturn, you’ll be well prepared to cope with those supposedly “dizzying” triple-digit drops in the Dow.
This article is provided by Lauri Binius Droster, CFP, senior vice president and a financial adviser at RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance.
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