The last week of stock market declines has taken the S&P 500 to the correction area for the first time in two years. While still in an upward, bullish trend, the S&P 500 officially fell to the correction range on Thursday, which is more than 10 percent lower than its record set in January.

One theory as to why the market may be correcting now is due to fears that the economy is too strong and complacent. The fear is that this could lead to inflation, which could cause the feed to raise interest rates too high too quickly and cool growth down.

Another concern is that the hunt for interest rates over the last 8 years and the low interest rate environment have created an extremely risky situation for planning pension income. The threat of higher interest rates creates uncertainty in the stock market, as it could potentially make stock dividends less attractive. Remember, uncertainty causes volatility, which can lead to sudden corrections in the markets.

An obvious lesson for investors in this period of volatility is that periods of uninterrupted returns do not last. A correction is a normal part of the investment. When the markets correct, you can not control their length or difficulty, but you CAN control how you react.

The recent dramatic pullback in stocks has created a buying opportunity if you follow the stock buy theory of “buy-low, sell-high”. I have no idea where the market is going next. It may continue with a long-term correction, or it may return to the January highs. One thing is for sure, you had to put some money into work if you were smart enough to take any profits off the table in late 2017.

This brings me to an important point of enlightenment: if your financial advisor has not spent at least some money working on this correction - you MUST FIRE HIM!

The job of a good "financial advisor", no matter what they call themselves: CFP, CHFC, etc., is to make sure you get allocated properly and have money available to buy shares when they are sold. You pay him to stay calm and help prevent you from panicking and selling your investments at the wrong time. Also, your advisor should have made sure you did not get greedy in this bull market and taken steps to help you make some profit so you had money to deposit when stocks got cheaper.

Understand that I do not support "market timing", which is specifically "all in" or "all out" of the market at all times. However, it is extremely important to have a method of buying and selling investments.

Also, if you are approaching retirement or are already retired, it is critically important to understand that avoiding major market disadvantages is the key to long-term investment success. The long-term results of avoiding periods of severe capital loss outweigh the short-term gains. Small adjustments can have a significant impact in the long run. The best money managers I know have always been adept at working around their positions using a set of rules to keep emotions out of the trading arena.

By the way, remember the risk questionnaire that your advisor had you fill out when you opened an account? What do you think about it right now? How will you feel if we're in a declining market for several months?

Risk questionnaires never give you the right answers you need to be successful in the financial markets. Your portfolio must always be designed (and closely monitored) to deliver a return that is sufficient to meet your long-term goals with as little risk as possible. Your appetite for risk will constantly change, so you need to construct a set of rules that must be followed in any market environment to help you with this goal.

Unfortunately, most "financial advisors" only collect real jobs to earn a residual fee. You would think that his services include "buy on dips", but it does not unless you are one of his best customers. You see, he does not have time to gather assets and see your account. There is not enough time in the day (or he may be on one of his sales price excursions he earned by capturing more of your money). The financial adviser's mantra is "buy and hold". This way, he can continue to make money in your account whether it is up or down, https://raknung.com/%e0%b8%ab%e0%b8%99%e0%b8%b1%e0%b8%87%e0%b8%97%e0%b8%....

Author's Bio: 

One theory as to why the market may be correcting now is due to fears that the economy is too strong and complacent. The fear is that this could lead to inflation, which could cause the feed to raise interest rates too high too quickly and cool growth down.