Worried About the Markets? Run Bear Market Scenarios with the Planner

It is okay to be worried about both the economy and the bear market. However, acting on that worry can cause major financial trouble if it means selling your financial holdings at a loss.

The point of the quote above is that it is often the right decision to buy and hold investments for the long term and not sell when the markets go down.

Yes, it is scary when the markets fall and you know that your account values are down. And, this fear and disappointment can sometimes trigger people to sell at lock in huge losses.

If you hold on to your investments, you are likely to recoup value and more over the long haul.

Not sure? Try the two scenarios below with the Boldin Retirement Planner.

Scenario 1: Simulate the Bear Market and the Long Term Growth Expected at Some Point in the Future

To assess the current downturn’s impact on your future wealth, try the following in the Planner:

• Start by creating a new scenario. Or, you can opt to update an existing scenario. ***
• Update your account values. (This happens automatically if you have linked your accounts using Plaid.)
• Next, model a current rate of return of 0%.
• Then, model a change to your rate of return starting whenever you think a recovery might occur.
  • You might want to input a relatively conservative long term average rate of return. But, it may also make sense to input more aggressive rates.
• Finally, use charts from the Insights library to evaluate your: chance of success, savings values over time, projected net worth, and more.

This exercise should help reassure that your long term security is not lost. Here are more tips for what to do when the stock market goes down.

*** NOTE: Account balances are currently shared across all scenarios. This means that when you update your balances in one scenario, it will impact all scenarios.

Scenario 2: Move to Cash

You could also try a scenario in the Boldin Retirement Planner almost no financial expert would recommend in real life. However, it could be an interesting thought experiment to evaluate what your financial future would look like if you were to move all of your savings to cash. (And, if you were to compare this scenario to the one above, you will likely see the advantages of staying invested.)

To model selling investments and moving to cash, you could:

• Either create a new scenario. Or, you can opt to update an existing scenario. ***
• Then, update all of your account values to today’s values. (The values should be automatically updated for any accounts linked via Plaid.)
• Next, change your rates of return to what you might earn in a savings account or money market fund. (Typically a much lower return than you would see in stocks or funds.)
• Finally, use charts from the Insights library to evaluate your: chance of success, savings values over time, projected net worth, and more. And, compare your financial outcomes from Scenario 2 with those seen in Scenario 1.

*** NOTE: Account balances are currently shared across all scenarios. This means that when you update your balances in one scenario, it will impact all scenarios.

About Peter Lynch

Peter Lynch knows a thing or two about investing. He managed the Magellan Fund at Fidelity investments from 1977 to 1990. During his tenure at the head of the fund, Lynch averaged a 29.2% annual return, consistently more than double the S&P 500 stock market index 

He is a proponent of both value and long term investing. His advice has made his book, One Up on Wall Street, a bestseller and a classic for investment know-how.