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

teach your child good money habitsSwap Older Annuities or Life Insurance Revocable Living Trust3 bucket approachcnbc alarm clock2015 financial roadmaprequired disclosureAARPnon conventional routecredit utilization rateprofessional advisorreplace permanent life insurance with termno fee transferwaive home inspection bidmanage student loanswrite new goaloverspend on nights outraising mortgage rates Employer Matched ContributionARM Cautiondental discount planage appropriate goalsyours, mine & oursbalance transfer avoid burn outmental healthderailed planautomatic paymentmultiple lenders2017 Taxestake actionis it kind?eliminate credit card debtEmergency SavingsGay RightsHeartwomen outlive menMass Mutual8 Rulesfile asaphigh deductible health care plancar leasingGiftsTelepicturesexercise reguarlyloved ones dependent on incomeSuze changed my lifeSchool of Social Workiffy incomeInterestapproved medical 100% tax-freelow mileage discounthome buying mistakesSelectQuote.comBeautynegotiate points with bank or sellerbest interest of investorMarlo Thomasno private loanspay down car loanschedule vacationthree year car loanunder 18 financial giftFinancial Gift Cliffdon't spend prescription tier3% debt transferred small changes Federal Reservesocial securitygraduationLong Term Care shopping2016 adjust estimated taxretirementclosing disclosureConventional loan PMIsocial security never insolventadvice for college graduatesonly refinance if it paysovercome financial fearscost of capitalization calculatorrolloverno life insurance financially irresponsibleback-to-school budgetultimate compounding gift2015 record year car salesraise deductiblesHSA tax savings401(k) Contributionshigh FICO scorephysical healthis it true? high down paymentcostly insurance mistakeSuze approvedpublic service loan forgiveness programdoctor no longer in networkearn allowancesocial security not going brokehigher insurance deductiblepoint cost offset by savingsHoliday Seasonhome buying seasonMust Have Documentsteach importance of helping otherssummer job match income Bankruptcyroth iraprovider of financial supportchildren under 18get credit cardFinancial Awareness Video Festivalresponsiblemake saving a pleasurezero rate transfer dealspresident Obamabig results no apologyrent vs buyhigher monthly paymentbuy down permanent life insuranceCPI-Wautomate student loan paymentsstore credit cardslong term careprotect loved ones 20 year level term allowance tasksetup automatic savings withdrawhigh premiumsSuze OrmanBank8 month emergency fundPrime Rate Rise 2015full retirement ageemployer offered life insurancebad decisionstax refund fraudAuto Savings get the most out of social security Holidayhome related tax break bonus universal college accessstaycationwould you decline a bonusvalentines daypercentage men widowed 75-84insurance yearly reviewbecome member adjust allocations healthy teethoverspend on dining outcut monthly cable billincreased auto insurance premiumloan necessitySuze Orman spouse Kathy Travis40% toward financial goalworst financial mistakepaid vacationunexpected expenseoverspend on giftsdon't charge a pennycommunity bankUS Tax CodeHDHP/HSAInfluential Celebritybuy homeRoth 401(k)positiveface your financial fear3 savings buckets age appropriate chore15 year mortgageclosing feesEasy Life Insurance burn outPay Off Debt Before RetirementWarner Bros Television GroupHDHP's are good for youInvest for savings growthbest interest rateslearn good financial choicesalways use all paid time off30 year mortgage increase emergency savingsemployer funding HSAbetter termsverify wellness screening and programsresponsible with moneysave january billsone annual feedo not pay allowance for good behavior20 to 25 times annual incomeStudent Loandangerous money seasoncredit cardstandard ratelong-term care emotional stakesat worst still pay 75% benefitdear suzeLTC shoppingdon't use allowance as bribeCNBCbuying a carreferrals don't blow tax refundfocus on new truth Suze is my biggest mentormax benefit coveredFinal Goodbyelife insurancestudenthighest possible benefitFinancial Cliffaccelerate dental workGiftpay down student loan debthome budget after tax costplansavingsquick closingclosing costs 2% of loanpaying for collegecontribute household expenses 50 over 50open enrollment review emergency fund allowancelower premiumraising interest ratesmortgage brokerdebt freehealthy retirement blood pressureno sneaking in feeslousy investmentSandy Hook Promiseinsurancefraudulent returnForbesAdequate Auto and Home InsuranceFederal PLUS loanpublic service career student loan repayment Selfishpay interest while in school4 Must Have Documents lower interest ratewomen live longerdeath benefit needs for familyraise insurance deductibleproperty taxpay credit debt ASAP20% down payment avoid feesCollege of Veterinary Medicinepurely financial standpointFixed Rate Mortgagebuy home you can affordbill paying prioritiespush yourself to save more for retirementholiday spendingLTCsecured cardLTCi ASAPdo you need life insuranceStudent Debtconfident of solutionWillstrained relationshippay 100% cashMoney MarketForbes Top 10home buying budgetPhyllis Shelton expert long-term carenot enough life insuranceCory Bookerjuggle multiple financial goalsFinancialsidelinedlow-cost index mutual funddon't extend mortgage protect your familyworkaholicitemized deductioninitial tax break let them have 50% controlshort term goal don't ignore open enrollmentFederal Stafford loanThe Suze Orman Showmobile appcar buying mistakesconfidentdebit cardnew carNewtownloan is giftretirment savingsno retirement funds for down paymentswitch to roth 401(k)teens and moneyhealthy gumsCredit Card Interest RatePost-Divorceno late fee protect and provide for minor child Student Debt CrisisRevocable Trustnear historic lowsAARP Social security calculatorlive below your meanslower overall drug costpreexisting condition not coveredFederal Funds Ratebe true to yourselfretain separate credit cardsFinancial Advicelower mortgage interestNew american Dream teenswomen longer life spanbuying car 2016value moneymarriage financial responsibilitycommissionslow down paymentFinancial AwarenessHDHP ARMfinancing car better loan ratesshorter payback perioddebtdental insurance charges on credit carddental savings plancollege graduatehealthy aging Americans don't use all paid vacation timefocus on needsdeath benefit 20 to 25 times annual incomeCombo Insurance Productsbest loan deal protect dependent school University of FloridaLong Term Care premiumsgrandchild summer job IRA contributionMost Influential Celebrities Listterm insuranceonly offered while employed pay off debtraise your deductibletax ID theftautomatic withdraw to savings Mortgage Credit Availability Indexsocial workcreate new truthSave Us Money20% down paymentlong-term care premiumsWall Streetbad retirement planningdon't derail retirement savingsGoodbyespring summer 19 years cash flow problemAlarm Clocksavings pleasureLong Term Care Insurance Richreduce monthly paymentinterest capitalizationSandy Hook Elementary Schoolborrow each year, capitalization is going to pile up gift grandchild IRA contributionwives should be involved in retirementSatisfyingNew York LifeJose Rodriguezbetter loan dealscut monthly cellular billlower rateignore 6 month grace period One Wallet At A Timeeight month living expense alternative FICO scoredoctors in networkfederal student loan deferment community collegeaffordabilityHDHP's are not badadult childrenis it necessarystudent loan debtgift not loancredit management401Kstay positiveSuze Orman Scholarshiplong term goalFree Debt Eliminatorborrowing plan switch to spouse coveragefinancial independenceGay Coupleshigh credit score discountbe kind to yourselftaxescollege studentdon't buy wantssame-sex marriageget over life insurance phobiaHDHP'sVeterinary School10 year repayment plan one credit cardtraditional vs roth 401(k)Personal Financeengaged in financesstudent loan repaymentlow credit scorereal estate markethousing marketinterest on student loansmonthly benefit credit unionco-sign gift up to 14,000Death Benefitmaintain standard of livingorigination feesFRAcostly legal secure creditHoliday Shoppingcommitno interestidentity theftCredit score20% equitychildren's bookritual scheduleLifestyleBill and Pennyfour steps to retirement savings no waiting periodpay more than minimumETF'shome insuranceFiscal Responsibilitycar loananticipated salaryemergency fund savingshealthy retirement weightrefundloan big picture get health insurancemortgage disclosureinsurance mistakepercentage of women widowed 75-843 step financial road mapkid borrow firstno splurge FICO credit score credit card mortgageRetirement Incomerepay student loansgrandparent IRA contribution fiduciaryno negativitygay marriage ban end Florida consider roth 401(k)Citi Simplicity Card FICO at least 720breakdown projected monthly housing costmeet monthly don't defer interest paymentstelevision hostkids schedule paymentsfinancial concernAshley Springerretirement plancontribution budgetpaid in fullstandard deduction leave a legacyFundsmax employee matchdream schoolCredit Card Rate Increase8 month safety netVital Documentsincentives for health care wellness screeningannual cost of living adjustmentTeachOverspendingdangerous retirement planbe good examplenot gender specific couple financesstudent loan repayment estimatorAmy LacyetWashingtonno tax on withdrawlsearn more on savingsfile taxes quicklyescrowloan no longer than 36monthsHow To Build Creditmarriage inequality!00% tuition paidMoneytoo expensive schoolCOLAstretch out haircut appointmentspremiumMinor Children Baby BoomersFICO ScoreHigh FICO Score = Better RateEric Dodge 6 month waiting periodhome loan credit score below 740 family save at least $100 monthlyverify retirement plan with HR or plan sponsorFinancial EducatorCommunication Skills financial aid2016 adjust withholdingIRA contribution gifted moneyhome ownershipsave moneymortgage interest tax deductionreduce withholdingtitle insuranceretirement accountsmoney vowsMotherlife insurance name trust as beneficiaryUniversity of IllinoisChanging Livespeace of mindletter to suzeMoney-SavingUrbana-Champaignrequire chore in exchange for allowancepay high rate off firstincrease retirement savingscan you afford itenjoy saving Spendingcredit reportStaffords this year have a fixed 6.8% interest ratehealthy youLegal Guardiandon't cover cosmetic dentistry10% donate to charitylowest cost fund optionunsubsidized Stafford loanspeak new goalDurable Power of Attorney for Health CareFinancial Solutions For YouAccuQuote.comPrime Rate Increaserising home prices15-year refinance dealStock Investmentsaffordable premiumsame sex marriage band end Floridawomen long term caremortgagerefinanceFinancial SystemCommencementcalculate dependents annual income needsfinancial argumentsmonthly dental insurance premiumHigh Credit ScoreCivil RightsSuze Orman's Money Warsdon't do five year car loanExhibitionpowerfulfinancial fearsmoney-aware childcomparison shoppingshop online guaranteed level term policydepreciating asset Financial Power of Attorneyknow before you owesuitableForeclosureInflation Benefitadd teenspecial saving accountkeep a schedulesuccessYoung Adult compare monthly expensescompare provider pricingfinancial goal phraseFHA loan feesno private loanreal estate mistakesLoveback door Roth IRACD'sidentity fraudGrace740 credit scoremax employer matched 401(k) contributionis it necessary?heartachereduce interest rateInfluentialsstudent loan repayment planRetirement SavingsPBS Specialterm life insuranceincrease retirement contribution rate

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