Are you watching the markets, the headlines and the price of oil and wondering what could possibly be next?  Take heart, you aren’t alone.  Many of us are worried about what these things mean, and how it could affect us, our money and our life.

Here’s where a little knowledge + perspective helps.  Just as Chicken Little  runs around and drums up hysteria in the village, so do the headlines.  While the media is reporting actual changes in market performance, business deals and the like, keep in mind that part of the media’s job is also keeping you interested in reading, watching and logging in.

Let’s start with some facts.  Market cycles are a normal part of investing. Historically, we’ve had a bear market (decline of 20% or more) about once every 3 ½ years since 1900.  For example, you may remember the savings and loan crisis in the 1990s.  Six months after its bottom, the S & P 500 rebounded by 23%.  The dot-com bubble burst in March, 2003 followed by a 17% rebound by the S & P 500 six months later*.  Now, can anyone truly predict what will happen next?  Nope.

That brings us to the next fact - money is a very emotional subject, which usually leads to emotional decisions instead of those based on reason and opportunity.

So, here’s what NOT to do during this market:

• Do anything to the extreme – “get out” or “all” or “everything”  (All emotions.)
• Sell all your holdings to cash and wait.  (Fear based decision and you’ll miss the recovery because now you’re guessing.)
• Invest all in the market.  (Greed based decision. Too much of a good thing…)
• Buy CDs with all your assets.  (Fear again and you’ll miss the market recovery because your money is tied up.)

What should you do?  Focus on what you can control.

• Keep your portfolio well diversified; invest based on your goals.
• Evaluate your true risk tolerance. (Consult with a professional, not your neighbor.)
• Use a long-term investment perspective.
• Be aware if you are outside the FDIC insured limits on bank accounts.
• Understand your household cash flow, how much you’re earning vs. spending.
• Dollar cost average into appropriate investments – means you buy shares at regular intervals.  With prices down, there are good opportunities available. 

The best thing you can do for yourself is get some professional advice.  Chicken Little jumped to conclusions without seeking advice or evaluating any facts, and created panic in the barnyard.  This is a good time to consult with your financial advisor, review your goals, and make informed decisions to meet them.

*Source, Capital Research and Management Company