Itâ€™s easy to say and write, â€œRelax, donâ€™t panic. Markets go up and down,â€ but itâ€™s a lot harder to do that when you and your familyâ€™s financial well-being is on the line. While plunging profits and economic downturns in faraway places may feel like a major threat to your personal wealth, as is the case with many things, the most important thing to manage is your fear.
Thatâ€™s no small task when you consider that money affects everything from our lifestyle to our relationships.Â Money coach and author Jacquette TimmonsÂ says managing fear in falling markets can be particularly difficult for blacks.
â€œMany of the blacks who are investing and climbing the wealth ladder are experiencing early generational wealthâ€“being among the first in their family to amass wealth,â€ says Timmons.
â€œIt often comes with a sense of responsibilityâ€“people feel like itâ€™s their duty to protect the money for their families. Someone in this situation would be a candidate for panic selling when they see a market falling because they would have a heightened concern about minimizing their losses,â€ she adds.
Ariel Investments L.L.C. finds that 24% of African Americans would pull money out of the market in the event of a downturn compared with just 10% of whites.
â€œCall these market swings â€˜the antacid test,â€™â€ says certified financial planner and author, Paula Boyer Kennedy. â€œIf you get acid reflux when you look at the S&P, perhaps you should look at a more conservative allocation.â€
While itâ€™s important to understand your personal tolerance for risk, Boyer Kennedy adds that itâ€™s important to keep perspective. â€œInvesting is for the long term. Do not worry about how your investment did in the past few months. Stocks are still one of the best places to put money when the time horizon is 10 years or more. Experienced investors like Warren Buffet love market downturns, because they can now buy stocks at a lower cost.â€
Financial experts also say itâ€™s important to keep sight of your goals. â€œWhatâ€™s the timing of your goal?â€ asks Timmons. â€œFor example, money you need within one to 5 years, should be in a money market fund, a certificate of deposit that you can roll over or a regular savings account. Money that you donâ€™t need for five to 10 years should be in the financial markets, I recommend a mutual fund that skews more toward stocks. As for money you donâ€™t need for at least 10 years, you can be really aggressive with stocks. Make sure you have some international exposure as well,â€ she adds.
Always keeping in mind that you donâ€™t lose any money in the stock market until you sell.