Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

Four Smart Moves in a Falling Stock Market

March 24, 2016 at 12:00 AM

Nobody likes to see the value of their investment accounts fall, but whether it’s a correction (a drop of at least 10% but less than 20%) or a full-on bear market (a decline of 20% or more) the reality is that markets go through rough periods. Always have, and always will. That makes it important to be extra smart in how you react when the markets are falling. Make a wrong move and you could derail your long-term security.

Here’s how to handle any bad stock market:

  1. Relax. Falling stock prices are a good thing for long-term savings. If you are saving for retirement or another goal that is 10 or more years off in the future, you should be happy stock prices are down. When stock prices are lower, your money buys more shares. And then you own more shares for when stock prices rebound. For example, let’s say you are contributing $500 a month to a stock fund. If a share of that fund costs $25 you can buy 20 shares. But if the share price falls to $20, your $500 now buys you 25 shares. Let’s jump ahead 10 years. The share price is now $55. If you owned 20 shares you would have $1,100. If you owned 25 shares you would have $1,375. When time is on your side, a down market is a great chance to “buy low.” 
     
  2. Revisit your strategy. If you are suddenly jittery because stocks are down 5% or 10% or 20% or more, ask yourself why. If you’re a long-term investor the losses you are seeing today are likely coming after strong gains during bull markets. For example, from the bear-market low of 2009 through the spring of 2015, the S&P 500 had a total return of more than 200%. Since then, through mid-February of 2016 the index is down about 15%. That’s not pleasant to experience, but it’s important to keep it in the context of the longer-term returns. That said, if you just let the stock portion of your portfolio grow and grow and grow, that’s a mistake. If your goal is to have 60% invested in stocks but you haven’t paid attention for a few years, and that climbed to 70% or more, a rebalance is long overdue.
     
  3. Make the most of losses. For any investments you own in taxable accounts, you can save some money by selling losers. When you sell an investment you have owned for at least one year for a loss you get to claim a long-term capital loss on your tax return. If you also have a realized capital gain, the loss is used to offset the gain. That of course reduces your tax bill. No offsetting capital gains? You can deduct up to $3,000 of a capital loss against your income (if your loss is more than $3,000 you can keep claiming the loss in subsequent tax years.) Any asset you own for less than one year is considered short-term. If you have a short-term loss it must first be applied to offset any short-term gain (which btw, are taxed at ordinary income tax rates). No short-term gain? Okay, then your short-term loss is applied to any realized long-term gain. If you don’t have that, then you get to deduct the loss against your income (again, up to the $3,000 annual limit.)
     
  4. Don’t get too conservative. Selling your stocks and moving your money into cash or short-term bonds would no doubt feel soooo good right now. But please be careful. What makes you feel better when stocks are falling can become a big problem. The reality is that bank CDs and short-term high quality Treasuries aren’t yielding enough to keep up with inflation. And for any long-term goal (retirement money you will live off 10, 20, 30 or more years from now) you need to earn more than inflation, so you will be able to afford future (higher) priced goods and services. Sure, I know your thought is that you will wait for stocks to stop falling and then get back in. That’s incredibly logical, yet ridiculously hard to pull off in reality. What happens is that you will likely still be sitting on the sidelines when stocks rally and so you miss out on the gain. Over the long-term stocks are your best shot at inflation-beating gains. Read that carefully. I said over the long-term. That’s why your long-term plan should always have some exposure to stocks. How much depends on your personal situation. One rule of thumb for your retirement money you might consider is to keep your age in safe investments. So if you are 60 you might have as much as 60% in CDs or short-term Treasuries, and the rest can stick with stocks. For the long-term.

Tag Cloud

don't blow tax refundMust Have DocumentsHeartFederal Reservedepreciating asset college studentgrandparent IRA contribution iffy incomeshort term goal dental discount planlower interest rateWall Streetlet them have 50% controlmultiple lendersCombo Insurance ProductsMortgage Credit Availability Indexplan3% debt transferred 4 Must Have Documents Lifestylefile asapSuze approvedignore 6 month grace period SelectQuote.comHDHP's are not badlong-term care premiumsCollege of Veterinary Medicinebalance transfer Credit Card Interest RateYoung Adult Money Marketkeep a schedulefull retirement ageHoliday ShoppingARM CautionFinancial Solutions For Youadvice for college graduateswomen longer life spanHDHP/HSAget health insurancecost of capitalization calculatorPBS Specialproperty taxlow-cost index mutual fundcar leasingrequire chore in exchange for allowancesocial security not going brokeCredit Card Rate IncreaseOverspendinglife insurance name trust as beneficiarystay positive20% equity30 year mortgage Financial Cliffmarriage financial responsibilitybest interest ratesmoney-aware childHDHP'sCiti Simplicity Card three year car loanlong term goalis it true? mental healthhome loan credit score below 740 New York Lifeaffordabilitydon't charge a pennynear historic lowsWillGiftzero rate transfer dealsbetter termslow credit scoreEric Dodge same-sex marriagesuitableat worst still pay 75% benefitjanuary billsmax employee matchcomparison shoppingfiduciaryInvest for savings growthcredit utilization rateunexpected expensepowerfulStock InvestmentsCredit scoredon't buy wantslow mileage discountWarner Bros Television GroupFederal PLUS loanSandy Hook Elementary SchoolStudent Loanpublic service loan forgiveness programlousy investmentprovider of financial supportFiscal Responsibilityno tax on withdrawlsstudent loan repaymentStaffords this year have a fixed 6.8% interest rateLong Term Care premiumsSuze Ormanage appropriate goals401K8 month safety netpay down student loan debtHDHP debit cardEmployer Matched Contribution8 Rules20% down payment avoid feesstandard deduction verify wellness screening and programsdeath benefit needs for familygift up to 14,000referrals credit reportcredit management20 year level term Federal Stafford loanget credit cardrequired disclosureHDHP's are good for youresponsible with moneyfraudulent returnFree Debt Eliminatorholiday spendingPrime Rate Increaseloan no longer than 36monthsloan big picture always use all paid time offBaby Boomersinterest on student loans15 year mortgageadjust allocations women outlive meninsuranceFinancial Educatorcut monthly cable billdebt freeDeath BenefitcommitCOLACD'sPhyllis Shelton expert long-term caretax refund fraudVital DocumentsSuze is my biggest mentorpush yourself to save more for retirementFundsprotect loved ones couple financesdon't do five year car loancharges on credit cardorigination feesbill paying prioritiesMinor Children write new goaldangerous retirement planAmericans don't use all paid vacation timeage appropriate choreprotect your familyfinancial fearsmortgage disclosureterm life insuranceback door Roth IRAstudent loan debtEasy Life Insurance Retirement SavingsAuto Savings protect and provide for minor child dangerous money seasonconsider roth 401(k)automatic withdraw to savings Influential Celebritynot enough life insurancesavingsreplace permanent life insurance with termpay credit debt ASAPLegal Guardianraise your deductibleemotional stakesno waiting periodadult childrenForeclosurebuying a carkid borrow firstonly refinance if it paysterm insuranceGay Couplesfocus on new truth family save at least $100 monthlylearn good financial choicesbad decisionspaid vacationWashingtonFHA loan feesInfluentialsfederal student loan deferment confident of solutionLTCi ASAPlong-term care housing marketanticipated salarypaid in fullPersonal Financechildren's bookvalue money50 over 50unsubsidized Stafford loanincrease retirement contribution rateAmy Lacyetcompare monthly expenses2015 financial roadmapannual cost of living adjustmentreal estate mistakesETF'spermanent life insurancecredit cardraising mortgage rates not gender specific healthy gumsMarlo Thomasfinancial argumentsborrow each year, capitalization is going to pile up pay off debtmake saving a pleasuredon't spend four steps to retirement savings reduce interest ratepeace of mindtake actionhealthy teethdebtJose Rodriguez2016 adjust withholding40% toward financial goalstandard ratelowest cost fund optionrepay student loansgraduationUniversity of Floridagrandchild summer job IRA contributionidentity theftRoth 401(k)spring summer savings pleasurebad retirement planningmeet monthly gift not loanavoid burn outcan you afford itraise deductiblespercentage men widowed 75-84school taxesrefundConventional loan PMIhome buying mistakesmortgage brokerpay interest while in schoollower mortgage interestteach importance of helping othersapproved medical 100% tax-freespeak new goalovercome financial fearsresponsibleletter to suze2016 adjust estimated taxrefinanceFRAFederal Funds RateFinancial Awareness Video Festivalcar buying mistakesAARPdon't use allowance as bribeface your financial fearhealthy youstudentForbes Top 10home buying seasonpay more than minimumtax ID theftbuy down Holiday SeasonGoodbyewomen live longerpresident Obamano private loancollege graduatesave retirementgift grandchild IRA contributionCPI-WPay Off Debt Before Retirementmonthly dental insurance premiumno private loansdoctor no longer in networkrent vs buybuy homecut monthly cellular billcommunity bankknow before you oweHolidaySuze Orman spouse Kathy TravisCommencementinitial tax break paying for collegeBeautydoctors in networkNewtownraise insurance deductiblestore credit cardsget the most out of social security would you decline a bonusFinancial AwarenessSelfishmoney vowsGiftssecure creditvalentines dayPrime Rate Rise 2015mobile appbecome member Exhibitionpublic service career student loan repayment Financial Power of AttorneyGay Rightsheartachetelevision hostbudgetallowanceshop online guaranteed level term policyincentives for health care wellness screeningLong Term Care shoppingretain separate credit cardsStudent Debt Crisisconfidentdo not pay allowance for good behaviorLTCclosing costs 2% of loanThe Suze Orman Showdear suzeDurable Power of Attorney for Health Caretraditional vs roth 401(k)don't cover cosmetic dentistrynegotiate points with bank or selleryours, mine & oursreduce withholdingautomate student loan paymentslow down paymentnew carhealthy retirement blood pressureeliminate credit card debthome related tax break bonus Most Influential Celebrities ListHSA tax savingsburn outfinancing car high FICO scoreFinancial Gift Cliffclosing disclosureFICO at least 720accelerate dental workbe good exampleRevocable Living Trustbest loan deal point cost offset by savingsAdequate Auto and Home Insurancehigh down paymentCivil Rightsprescription tieremployer offered life insurancestrained relationshipAccuQuote.comInterestsetup automatic savings withdrawderailed plandream schooltoo expensive schoolSave Us Money3 bucket approachloan is giftwives should be involved in retirementspecial saving accountis it necessaryno life insurance financially irresponsible740 credit scoreAARP Social security calculatorcontribute household expenses one credit cardno interestpositivehealthy retirement weightescrowno splurge 10 year repayment plan co-sign 401(k) ContributionsCommunication Skills real estate marketschedule vacationteach your child good money habitssame sex marriage band end Floridateens and moneyretirement accountsallowance taskno retirement funds for down paymentdon't ignore open enrollmentrising home pricesswitch to roth 401(k)8 month emergency fundSuze Orman ScholarshipGraceSchool of Social WorkChanging Lives2015 record year car salesinsurance mistakeone annual feeno fee transferis it kind?shorter payback periodcontribution lower overall drug costUS Tax Codeenjoy saving automatic paymentBankfinancial independencephysical healthhighest possible benefitBill and Pennyprofessional advisorSandy Hook Promisemanage student loansForbesUniversity of Illinoishome ownershipverify retirement plan with HR or plan sponsorCNBCno apologysuccessdon't defer interest paymentsexercise reguarlysmall changes Spending10% donate to charitybe true to yourselfleave a legacydo you need life insurancelower premium6 month waiting period!00% tuition paidHigh FICO Score = Better Rateworst financial mistaketeens20% down paymentcreate new truthRevocable Trustcar loanARMcommunity collegefinancial goal phraseloved ones dependent on incomedon't derail retirement savingspay 100% cashroth irawaive home inspection bidstretch out haircut appointmentsLTC shoppingSuze changed my lifeVeterinary SchoolSatisfyingFixed Rate Mortgage15-year refinance dealstaycationfinancial aidhealthy aging social securitysocial workpreexisting condition not coveredcnbc alarm clockswitch to spouse coverage3 savings buckets under 18 financial giftfile taxes quicklymortgageloan necessityinterest capitalizationrolloverFinancial Systemno sneaking in feesjuggle multiple financial goalsinsurance yearly reviewsave moneylive below your meanshome buying budgetbig results better loan dealsOne Wallet At A TimeTeachearn more on savingshigh deductible health care planmaintain standard of livingFinal GoodbyeHow To Build Creditcompare provider pricingidentity fraudCory Bookerkids schedule paymentsitemized deductionoverspend on nights outmax employer matched 401(k) contributionbe kind to yourselfUrbana-Champaignemergency fund savingsprotect dependent closing feescalculate dependents annual income needsengaged in financesbest interest of investorMass Mutualno late fee High Credit Scorecommissionshome insurancecostly legal pay high rate off firstaffordable premiumdental savings planTelepicturesalternative FICO scoreritual schedulesecured cardretirement planFICO ScoreEmergency Savingshigher insurance deductibleraising interest ratesretirment savingsget over life insurance phobiawomen long term caremax benefit coveredfinancial concerngay marriage ban end Florida buy home you can affordpay down car loanquick closingMotheris it necessary?Long Term Care Insurance mortgage interest tax deduction19 years cash flow problemoverspend on dining outadd teenFinancial Adviceemployer funding HSAincrease emergency savingsearn allowancepurely financial standpointborrowing plan 3 step financial road mapnon conventional routecostly insurance mistakepercentage of women widowed 75-84focus on needsback-to-school budgetAshley SpringerSwap Older Annuities or Life Insurance Suze Orman's Money WarsPost-Divorcemarriage inequalityoverspend on giftsopen enrollment review Retirement Incomebreakdown projected monthly housing costMoney-SavingMoneystudent loan repayment estimatorultimate compounding gifthigher monthly paymentBankruptcyLovedeath benefit 20 to 25 times annual incomeeight month living expense 2017 Taxeshigh premiumscredit unionbetter loan ratesStudent Debtbuying car 2016emergency fund New american Dream IRA contribution gifted moneystudent loan repayment planreduce monthly paymentlong term careAlarm Clockno negativityincrease retirement savingsuniversal college accessworkaholicInflation Benefitdon't extend mortgage increased auto insurance premiumhome budget after tax costdental insurance premiumlife insurancetitle insurancesocial security never insolventonly offered while employed RichFinancial20 to 25 times annual incomehigh credit score discountsummer job match income lower ratesidelinedmonthly benefit FICO credit score credit card mortgagechildren under 18


View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel