Are you still in the stock market? Are you wondering if the time has come for you to get out? As a financial advisor, I am well aware of the mantra of industry professionals: “just wait it out.”

 

Sometimes that is the best advice – sometimes it’s the worst – but unless you have asked yourself the right questions, established goals, and come up with a financial strategy to reach those goals, there is really have no answered as to if you should wait it out, or get out now. Lets be realistic, the stock market has and always will be risky. Between 2000 and 2002 we saw severe bear markets and a lot of people made a lot of money. Then came 2008, when the economy tanked. No matter what any financial advisor tells you, the truth is that no one can accurately predict the future, so no one can predict the fluctuations of the stock market.

So how do you know if you should stay in, or get out? To obtain that answer you should ask yourself why you are investing in the stock market. The obvious answer will be to see your assets grow. However, there is more to be answered when contemplating that question. You should base your answer on the context of your personal situation. You should consider your life goals, how much you feel you will need to realize those goals, and to what extent stock market type returns will assist you in achieving the financial assets you will need. You have to have a plan in place. You have to know what is important to you, and what you want to accomplish. With those things clarified you will be able to work with a financial advisor to assess the risks you are willing and able to bear to accomplish those goals.

Over my 13 years as a financial advisor, I have encountered many investors who have placed their money in the stock market simply by default. They have never really given much thought as to if it is the best option for them. I have usually found that this type of investor has no personal life goals or financial strategies in place. In fact, I have found that after sitting down and doing diligent assessment and consideration, many of my clients come to the realization that their stock market investments really serve only one purpose – to increase the size of the estate they will leave their heirs. Now, let me be clear – leaving a large estate to a spouse, child or grandchild is a worthwhile and noble goal – it’s something everyone hopes to be able to do. However, you should assess if you are taking more of risk than you need to be taking, with no purpose beyond increasing the size of the estate you will leave behind.

If you are still wondering if you should be in or out of the market, then answer the following question:

Will you be more upset and financially hurt if you stay in the market and it continues to go down, or get out of the market only to watch it recover quickly?

In answering that question, remember, the market has as much risk in it right now as it has at any time over the past four decades. Stocks are still overvalued by historical metrics, and they remain a long-term investment. If you are in your 80s you should be looking at investing in the market in a very different way than someone who is in their 50s.

The most important thing to remember, no matter what your age, is that investing is done for one purpose – to create income. The question you have to ask is when do you want that income, and what do you want it for. Once you know what you are trying to accomplish, you will have a much greater ability to decide your best course of action.

William Jordan is a nationally recognized financial advisor and well known speaker on a variety of financial and investment topics. For a free financial health assessment, contact his office at (949) 380-8600 or online at www.WilliamJordanAssociates.com.