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You’ve been hearing about the coming of the next market correction for a while now. While everyone is expecting it to happen, we’re simultaneously experiencing the longest growing market in history.

“Maybe you think it won’t happen; the economy is just too strong. Think again,”  says Don Wenner, CEO of DLP Capital Partners. “Although no one can predict exactly when it will happen, the stock market WILL go through a major decline, home values WILL go down, and most asset classes WILL have some kind of  major disruption. In other words, there will inevitably be a market correction.”

But how will you (or should you) adjust your investment strategy to prepare yourself for a downturn? To determine your course of action, you should ask yourself a few questions.

What Are Your Investment Goals?

Evaluate your investment goals and needs over the next 6 to 10 years. How much money do you really need?

“How important is generating income and consistent distributions over that time period? If receiving consistent distributions is necessary, you may want to adjust your investment opportunities, meaning where you place your capital,” says Wenner.

How Important Is Liquidity?

Do you need easy access to your money? Maybe you’re just looking for rainy day money or perhaps it could be major life expense, like college.

“Whatever the reason, liquidity and your income over the next 6 to 10 years are extremely important when determining how to structure your investments,” adds Wenner.

What Does Your Investment Horizon Look Like?

What are you most concerned about? Maybe you need to withdraw money sooner rather than later. Is short term growth over the next 5 years important or could it be a broader 10-year horizon?

“If you have the luxury of having a much longer horizon, that can be significantly different on how the next market cycle will affect you,” says Wenner.

However, even if you may not need capital for the next 20 years and you think you’re in a good position, will you have the investment willpower?

“When the values on your investment statements decline each month during a market downturn, will you be able to ignore it and just file the statements away in your drawer?” asks Wenner.

Having the willpower to stay in your investment is important. Otherwise, like many investors, you’ll exit and cash in at a low point because you’re too worried about losing anymore money because you just can’t wait it out.

 

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