Doing Nothing – The Best Reaction to a Falling Market?

In my post last week I shared that I had moved my money out of my bond fund. A record amount of money was moved out of bond funds as other investors reacted to falling prices. A lot of people took their money out of the stock market in May when the market dropped sharply. According to a blog post at Betterment.com the smartest thing to do during a market dip is nothing.

They share that a surprising 98.7% of Betterment investors didn’t withdraw money during that time. The post shares four lessons to be learned from the recent decline. The first lesson is that recent declines do not predict future declines. Another lesson is that you should pre-act rather than re-act. The article also reminds you of the tax implications of moving your money out of the market. And finally, you need to consider that when you cash out you will eventually need to figure out when to get back in the market.

These are all valid points. I don’t need to worry about the tax implications since my money was in an IRA. Only time will tell whether moving my money out of the bond fund was a good move or not. What do you think, is doing nothing the best move?

Investing your money with a company like Betterment can make it easier to keep your emotions out of investing since they allocate the money for you. If you would like to find out more about Betterment or open an account just click on one of the affiliate links in this post or below.