“You have to think about how soon you’re going to need the money. The last thing you want to do now is put the next six months’ worth of mortgage payments into the stock market. The most important thing is to avoid having too much exposure to the stock or bond market when you can’t afford to lose money.”
Ignore “those blowhard experts who want you to panic.” Don’t listen to people like financial planners and brokers, who have a financial incentive to get you to move your money around. This is not the time to do that because “whatever you do is likely to be a mistake,” he says. “But if you absolutely can’t sleep at night unless you make a move, shift from growth stocks to dividend-producing stocks.”
If you can’t stay away from the bargains a lower market brings, at least “stay away from stocks with a high price-to-earnings ratio, the whisper-in-your-ear type.” And don’t take refuge in emerging markets. They’re fueled by American money as well, which makes them especially volatile. “They’re mistakenly thought of as a hedge against the United States, but they’re going to be killed worse than the United States if the markets go down.”
If you didn’t anticipate a downturn months ago, don’t sell now. She reckons that “the market correction may well be more of a 1970s style than the 1987 style.” In other words: slow and torturous. (The “drip effect.”) “We may well be experiencing this right now,” Armstrong says.
He’s “still reluctantly bullish.” However, he warns against investing in companies that are losing value-called “falling knives.” Such stocks may seem like bargains, but “there may be a very good reason they fell and if you get into a bear market, they may fall again.”
“Have faith in your investment plan and stick with it.” If you own stocks of large companies, small companies and international firms, “I promise you they won’t go up and down at the same time. If you’ve diversified, you’ve squeezed out as much risk as you can.”
“Don’t buy too early” as the market drops. “I think it could go as much as 700 points down … before it’s over. It could go down as much as 1200. What’s not clear is if we’re going to crash right now.”
