You Asked, We Answered: How to Handle Your Portfolio When Stocks Correct

Here at Money Morning, we believe you control your financial future.

But managing your own portfolio can lead to uncertainty in times like these. After more than a decade of healthy gains, stocks suddenly plunged last week. Between Feb. 21 and Feb. 28, the Dow fell over 13%, putting it squarely in correction territory.

On Monday, investors thought the worst was over after the Dow added more than 1,000 points, its single largest rally in a day. But Tuesday, the Dow fell 700 points despite the U.S. Federal Reserve announcing a new rate cut.

If you're wondering how to make sense of what's going on or what to do next, we totally get it.

That's why Money Morning Chief Investment Strategist Keith Fitz-Gerald and his 37 years of experience in financial markets is here to help.

Keith wants you to know you aren't alone. You've made it this far, and this could be an opportunity to reach your financial goals even quicker.

Today we're going to answer a few of the most common questions we've been getting from readers like you.

Barry M. asks, "Should I rebalance my portfolio during downturns like this?"

Seeing your stock values slide during a downturn can be scary, but it's an opportunity too.

"Rebalancing is a great idea on big down days or even generally depressed market conditions," Keith says, "because it forces you to harvest profits and plow fresh money into underutilized, underpriced alternatives."

If your portfolio is 80% stocks and 20% bonds and the downturn left you with 70% in stocks and 30% in bonds, then you have the opportunity to take profits from bonds and add even more stock.

But Keith was careful to remind us not to get carried away: "Rebalancing is not an excuse to do something irrational."

You don't want to sell assets to throw the money in a speculative "win it all back" position. You've got a plan for a reason, and sticking to it is the best way to weather these storms.

Rob J. asks, "I just stopped out of some of my positions. What do I do now?"

You did the right thing by adding trailing stops to your positions. But now that you're sitting on cash instead of stocks, it's hard to know what to do next.

Keith says pop the champagne.

"First, celebrate because you stuck to your discipline, and research shows very clearly that investors who do that have a significant advantage over those that don't."

But don't stop there. Keith adds, "Second, take a deep breath and do not get sucked into feeling like you immediately have to 'get back in' because of a relief rally. Wall Street wants you to feel that way so they can separate you from your money... twice."

"Instead, calmly reevaluate the chaos, and if the original reasons you bought something are still there, then get back in using dollar-cost averaging to keeps risks down, especially if there's more selling ahead."

Susan C. asks, "I just retired... What do I do with my investments to make sure they last?"

"Great question," Keith told us, "I suggest you take a good hard look at the proprietary 50-40-10 Model Portfolio I advocate in the Money Map Report. That - or something like it - can give you a significant advantage over conventional diversification models because it's based on 'risk parity' rather than simply spreading your money around willy-nilly."

This might be a time to talk to a pro who can give you personalized advice, too.

"Work with a financial planner to ensure that you tweak the model to fit your specific life situation, risk tolerance, and objectives; that way, you can ensure an appropriate balance between risk and reward, most of which Wall Street doesn't want you to understand."

We recommend a fiduciary who charges a fixed fee per consultation instead of someone who wants a percentage of all your assets.

Once you've got that squared away, keep coming back to find the best stocks on the markets.

"Keep in mind that great companies outperform the broader markets over time, and nobody ever went broke taking profits. It's my job to help you find 'em!"

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