Retirement planning requires discipline, and market turmoil tests everyone’s ability to keep their calm. We’re not even a month into 2016, and already it’s shaping up to be one of the most challenging years ever for investors. Those who’ve gotten used to the stock market starting a new year on the right foot have gotten a slap in the face, as the Dow Jones Industrials (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) have both been down by double-digit percentages in just a few weeks of trading. Yet despite that pressure, I’m optimistic that retirement investors will see the light and grab onto an opportunity they haven’t had in a while. Let’s take a closer look at some bold predictions for 2016.
1. Investors stuck on the sidelines will finally get into the market.
During the financial crisis in 2008, millions of investors panicked and took their money out of the stock market after suffering severe losses. At the time, many of them thought that stocks would continue to fall indefinitely, and so the shock of seeing the market recover so sharply in the years since has been a huge lost opportunity. As stocks have climbed to record levels time and time again, being on the sidelines has cost investors some huge returns.
Many investors have waited for what they saw as an inevitable pullback to get back into the market, and until now, stocks have been unusually stubborn in not giving them that opportunity. In late 2015, we finally had a 10% correction for the first time in several years, and some now expect the current pullback to take the Dow and S&P 500 to the brink of bear market territory.
The question is whether investors will finally jump on the opportunity when it presents itself. It takes a lot of courage to catch a falling knife in the stock market, but being able to buy stocks 15% to 20% more cheaply than they would have just a couple of months ago is powerful incentive. The smart way is not to try to time a reentry but rather to start slowly and ease in over time. You won’t pick the perfect market-bottom that way, but you’ll also get at least some of your money working for you if prices bounce back more quickly than anticipated.
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