It's a simple question: Are you a buyer or are you a seller? Your answer will tell you a lot about how to handle this market and also how you should have been handling your finances before.
You're a buyer if you're in the "wealth accumulation" phase. This would be most people who are working or truly wealthy retirees. You're focused on amassing assets. Using the image above for an analogy, you need to be gathering as many berries as possible, and ideally different types of berries, in preparation for the feast.
If you're a seller, you're likely pulling from your portfolio or soon to be in the "distribution phase". Most retirees would consider themselves to be in this category. At this point, your goal is to have enough assets that you can live off distributions and not eat too much. You're more worried about how well you can eat tomorrow than buying more berries today.
If you're a buyer and you believe our country and economy will live on and prosper after this current economic pullback, you should be looking for ways to acquire more assets. Keep funding your retirement accounts and saving, you'll be buying more at lower prices. Unfortunately, for some of you executives you may be forced to sell stock options in a depressed market and you should have had a plan to hedge this risk.
The sellers shouldn't have had too much of their wealth in the stock market to begin with. You should have been protecting your harvest and limiting investments to the ebbs and flows of the stock market for long-term assets. For folks in this category, right now is a time to consider whether they need distributions or can forgo until a time of better sale prices.
Knowing whether you are a buyer or seller, and segregating your assets to buckets that reflect this, can help you manage through this market. This can help you limit emotional decision making and ideally limit long-term damage to your financial future.
-Tim Golas, Partner @ Spurstone - Architects of Executive Wealth