September has historically been a volatile month for stocks, and this year was no exception. Earlier this week, the stock market experienced its worst slide in months. While things have settled down since then, many investors are feeling pretty shaken up right about now.
Since my investment portfolio is loaded with stocks, the events of the past week have prompted me to take action. Here are two key moves I’m making.
1. Assessing my investment mix
Sometimes, what starts out as a broad mix of stocks can shift as some companies see their share prices increase. Or to put it another way, you might start out with a portfolio that’s 25% invested in tech stocks, but if they rise in price, you might, a year later, end up with a portfolio that’s 50% invested in tech stocks. This would lead to an investment mix that’s less balanced than you’d like it to be.
It’s for this reason that I’m taking a closer look at my personal investment mix and making sure I’m still diversified. I may decide to move investments around if I find that I’m too heavily invested in one particular sector.
2. Setting money aside to buy more stocks
While the recent stock market sell-off may have been short-lived, stock values could easily fall again between now and the end of the year. And I want to be ready if that happens.
Many people look at stock market downturns as a bad thing. I see them as an opportunity to load up on quality stocks while they’re cheaper to acquire.
I have a few stocks on my watch list with share prices currently a little too high for my liking. I expect those share prices to come down if the market tanks on a whole, even if temporarily. The more cash I stockpile in anticipation of a buying opportunity, the better-positioned I’ll be to capitalize on any potential turbulence when that time comes.
The one move I’m not making
While I may be examining my holdings closely and making plans to sock away extra cash in light of the events of the past week, one thing I won’t be doing is selling off stocks in a panic. As someone who’s been investing for many years, I know all too well that you don’t lose money during a stock market downturn unless you actually liquidate investments, thereby locking in losses.
This doesn’t mean that I won’t sell a stock or two if I find that I’m too heavily invested in a specific market segment. But that’s a calculated decision. It’s not the same thing as selling stocks due to fear.
We don’t know what the next few months have in store for the stock market. Things could stabilize or volatility could ensue. Investors who approach the final quarter of the year with diversified portfolios and cash on hand may have an easier time sleeping at night and taking advantage of buying opportunities as they arise.
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