My investments are losing money. What should I do?

Introduction

Currently, your investments in municipal bond funds, ETFs, index funds, or individual stocks may be affected by bear markets. Therefore, it is not surprising that you want to know whether to pull your money out of the investment or not.

Keeping Current Investments

In general, I don’t think it’s a good idea to get rid of assets just because they’re losing money. Market fluctuations can be temporary, and if you sell your investment right when it drops, you might miss out on growing returns when the market starts to rise again. If you still believe your investment will perform well in the long term, you should hold onto it, especially if you are investing for the long term.

Are Municipal Bond Funds the Right Investment?

This is the right time to question whether municipal bond funds are the right investment for you at this moment. It’s not unusual to change the allocation of your portfolio based on the strength of the economy, your financial goals, age, and other factors. You didn’t mention your age or even what you are currently investing in, but considering your long-term financial goals like buying a home and a new car, I assume you are a young investor. In this case, municipal bond funds may not be the best option for you at this stage of your life. Why? Because your youth is the time to take risks, and that includes your investment choices.

Looking for Other Investments

Municipal bond funds, as they are called, are ideal for older investors because they are relatively low-risk investments that provide steady returns. They can be exempt from federal, state, and local taxes. However, lower risk often means lower returns, and this type of investment typically does not perform as well as stocks. Over time, you will miss out on higher returns that can help you achieve some of those financial goals you mentioned or even prepare for retirement.

However, this does not mean you should liquidate your investment in these funds and instead invest in other assets. Municipal bond funds can be a good way to diversify your portfolio or provide a better return than a more conservative asset like a certificate of deposit (CD), especially if you are risk-averse. But you might want to consider investing in other assets like stocks. Even if you invest in stocks, that doesn’t mean you can’t mitigate some risk. Instead of buying individual stocks, you might be interested in an exchange-traded fund (ETF), which is a basket of securities that are grouped together, such as by industry or theme. You can also look into an index fund, which is a type of fund that tracks the returns of a market index by investing in a portion (or all) of the securities in that index. Index funds are relatively straightforward ways to invest in indices like the S&P 500, which tracks 500 large publicly traded U.S. companies.

Take a moment to review your financial goals and the returns you are getting from your investment, and ask yourself if you are willing to take on more risk for potentially greater returns. If you are interested in investing for the long term, now is the right time to ask yourself if your investment strategy is working for you.

Good luck!

– Christine

If you have questions about money, Christine is here to help. Submit an anonymous question, and she may answer it in a future article.

Sources

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The Authority

The U.S. Securities and Exchange Commission. “Investor Bulletin: Municipal Bonds – Asset Allocation, Diversification, and Risks.”

The U.S. Securities and Exchange Commission. “Market Indicators.”

Source: https://www.thebalancemoney.com/my-investments-are-losing-money-what-should-i-do-5409300

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