Nobody likes uncertainty, but our world seems to be anything but certain these days. We are bombarded with frightening headlines talking about rising costs and international unrest. During uncertain times, the market tends to respond with volatility.
Stocks haven’t been performing well these last couple of months, which is only being worsened by investors selling off based on recession fears. In the last 6 months, all three indices experienced significant declines: the S&P 500 fell 12%, the Nasdaq fell 23%, and the Dow fell nearly 8%. (1) Even the big tech giants were not immune, with Meta (formerly Facebook) and Netflix taking big hits, falling 67% and 42% this year, respectively. (2) We can point our fingers at many factors as the cause of our recent nail-biting, but the fact remains that we have no control over any of that.
We’re here to help you take a deep breath and walk you through whatever our markets decide to do. Here’s how we are watching over your finances and taking proactive steps to help secure your wealth.
Big-Picture Planning
We don’t make investment decisions based on what everyone else is doing or what’s popular in the investment industry. Whenever we make planning and investment decisions, we do it with your goals at the forefront. When the markets get shaky, we go the extra step of reviewing your objectives to make sure you’re still on track and make educated decisions that are not based on panic or emotion.
This starts from the very beginning of our relationship with you. We use conservative return numbers when analyzing the potential outcomes of your plan because we know that corrections and bear markets will come again. We also use asset allocation “buckets” that divide your wealth into short, intermediate, and long-term strategies to help you make the most of a volatile market.
And in times like this, it’s even more important to have an emergency fund or a percentage of your portfolio that is either in cash or liquid enough if you need it for unexpected circumstances. While cash investments may not provide a lot of growth, having a cash contingency fund with at least one year’s worth of living expenses will protect you against having to sell investments at low values to free up cash.
We Know Your Risk Tolerance
Do you know that feeling in the pit of your stomach when you make a decision that was too risky for your comfort? Our goal is to help you avoid that feeling when it comes to your investments. Before investing any of your money, we determine your risk tolerance, the amount of risk that an investor is comfortable taking or the degree of uncertainty that an investor can handle. Like most things in life, your risk tolerance may change with age, income, and financial goals. We don’t want you to lose sleep at night, so we review your risk tolerance and how much risk you can afford to take and adjust your investments over time.
To best match the current environment to your particular situation, we constantly monitor your portfolio and make adjustments as necessary. It’s easy to get caught up in the financial headlines, but any moves we make must align with your goals, time frame, and overall asset allocation.
Timing Matters
During bear markets, it’s important to remember that investors only realize losses when they sell, so it’s critical not to sell when the market is down. When you need to access your money is an important factor in avoiding those losses. For example, if you are a decade or more away from retirement, you can likely wait out a recession or correction and benefit from the recovery. If you need access to your funds in the next five years or are within your first five years of retirement (frequently known as the “fragile decade”), (3) a recession will make more of an impact on your money and your plans.
From a practical perspective, we make sure your portfolio’s allocation is set up with your time horizon in mind. If you need money in the short term, your portfolio will hold safe investments like cash or short-term bonds. Because retirement can last decades, you still want some of your money in investments that will produce long-term growth, but your portfolio will look very different from that of a 40-year-old in the peak of their working years.
We Are Your Emotional Support System
One of the most important rules in investing is to refrain from making emotional decisions. When the market wreaks havoc on your finances, that’s certainly easier said than done! But if you stay true to your investment strategy and avoid making decisions when emotions are running high, you won’t run the risk of losing even more.
Remember, bear markets have happened before and they will happen again. As long as you have created a disciplined financial plan and have a trusted advisor who is monitoring your money, you are doing your part to prepare. Do you have someone you can turn to when the market gets wild? If not, we’d love to support you and help you build your finances for a strong future. Schedule a no-obligation introductory meeting by calling me at (619) 681-1911, emailing paul@fsiwealth.net, or scheduling a time online.
About Paul
Paul Neves is president and wealth manager at FSI Wealth Management, a leading independent wealth management firm based in San Diego, California. Paul is a CERTIFIED FINANCIAL PLANNER™ professional and a Chartered Financial Consultant®. Working with clients in the financial industry since 1989, Paul has dedicated his life to seeing his clients and their families reach their goals and fulfill the financial plans they have created for their life. He believes that trust and respect are key to building strong, long-lasting relationships with his clients. Paul is known for helping families take the mystery out of preparing for today and tomorrow.
Paul graduated from San Diego State University in 1989 with a bachelor’s degree in business administration, concentrating in financial planning and services. He is currently a resident of Point Loma, California, where he spends his free time with his family and friends either boating, cooking, wine tasting, or traveling. To learn more about Paul, connect with him on LinkedIn.
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(1) https://www.google.com/finance/?hl=en
(2) https://money.com/why-are-tech-stocks-down-2022/
(3) https://www.lifehealth.com/navigating-retirements-fragile-decade/