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How to cope with roller coaster stock market

Local financial adviser Justin Halverson has some advice on what investors should be doing right now.

GOLDEN VALLEY, Minn. — Dramatic fluctuations in the stock market have many investors worried about the impact on their 401(K) and other retirement investments. Justin Halverson from Great Waters Financial joined us with some advice on how to handle the recent fluctuations. 

Q: HOW WORRIED SHOULD WE BE ABOUT OUR INVESTMENTS? 

Your 401(k) will fluctuate with the market, so if you check your balance this week, you’ll likely notice it’s down. But market ups and downs are natural and actually necessary. This is a good time to take a look into your accounts and know what you own, but it may not require any action. Investors need to think long-term when making major changes in asset allocation. Just because certain stocks or mutual funds are performing poorly at this time, that doesn’t necessarily mean you should make an adjustment in your portfolio.

Q: WHAT CAN INVESTORS DO TO PROTECT THEIR MONEY IN THIS TIME OF UNCERTAINTY? 

Assess Your Risk

Emotions are the driving force behind a lot of investors’ decisions, especially fear and greed. Oftentimes, I see investors who get fearful when the stock market takes a dive and they pull out of their investments. Then, when the market starts rising, they get greedy and want to buy in. Emotions have us buying high and selling low, which are both big mistakes. Your investments should be diversified and have appropriate risk for your age and how close you are to retirement. Consider working with a financial professional to make sure your portfolio’s risk is appropriate for your age.

Think Long-Term 

Your 401(k) will fluctuate with the ups and downs of the market. This is a good time to take a look into your accounts and know what you own, but it may not require any action. Investors need to think long-term when making major changes in asset allocation. Just because certain stocks are performing poorly at this time, that doesn’t necessarily mean you should make an adjustment in your portfolio. Our goal is to protect clients from downside risk in the markets as they near or enter retirement. You can learn more about our retirement planning process on our website, greatwatersfinancial.com.

Q: WHAT CHANGES FROM THE GOVERNMENT MIGHT WE SEE TO BOOST CONSUMER CONFIDENCE? 

Emergency Rate Cut

Last week, the Federal Reserve enacted an emergency rate cut. It cut the target rate by a half percentage point to a range of 1%-1.25%. This is the first emergency rate cut since the financial crisis of 2008, meant to stimulate the economy and increase consumer confidence. The Fed will meet again next week, and there are signs they may cut rates again.

Income Tax Proposal 

This week, the Treasury Secretary recommended the IRS delay tax payments without penalty or interest. Wednesday night, the President also asked Congress to consider a payroll tax cut through the end of the year. The changes are meant for small businesses and families impacted by the coronavirus. Nothing has been confirmed yet, as Congress needs to sort through the recommendations and agree on the next steps.

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