Where Is the Stock Market Heading?

Where Is the Stock Market Heading?
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A lot of folks want to speculate about the direction of the stock market and our economy.


But I don’t spend my time worrying about such things. As we know, the stock market is volatile in the short term and up in the long term. For me, the question is: What can you live with?


If the stock market dropped 50% tomorrow, would that affect your living standard?


This question is not related to speculation about the stock market’s direction. Rather, it’s a question you should ask yourself every day to ensure your investments are structured to meet your needs.


[RELATED: How to Recession-Proof Your Finances]


If a stock market drop will hurt your living standard, you need to pull some stock market risk off the table until you have a level of risk you can tolerate. For example, if the stock market drops 50%, is a portfolio that drops only 20% acceptable? You can control the drop in your portfolio by adjusting your asset allocation, but you must realize that protection from a drop will reduce future increases.


If a stock market drop will not affect your living standard now or in the near term, you can profit from a stock market drop if you are dollar cost averaging in your investment accounts. In fact, you need a stock market drop to build wealth using the dollar cost averaging strategy. The bigger the drop, the better. Keep a large proportion of stock mutual funds in your portfolio.


Quit trying to crystal ball the stock market, and implement a plan that works for you — regardless of the future.

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About the Author

Lt. Col. Shane Ostrom, USAF (Ret), CFP®
Lt. Col. Shane Ostrom, USAF (Ret), CFP®

Ostrom retired from the Air Force in 2000 and joined the MOAA team in 2006. His responsibilities include researching and answering member inquiries regarding military benefits, health care, survivor issues, and financial concerns.