When markets swing, it’s natural to worry about your investments and question our commitment to your strategy. As financial professionals, here is what we recommend you do when markets swing…
1) STOP LISTENING TO THE NOISE
Turn off the television, throw away the business section, and stay off financial websites. Hanging on every word the talking heads say will only add to your stress and encourage emotional decision making. One of the major reasons why you work with a team of trusted professionals is so that you can delegate the worrying to us. We’ll keep you informed.
2) STAY FOCUSED ON THE BIG PICTURE
Ask yourself: How long is my investment horizon? If you are invested for 10, 20, or 30 years or more, volatility that lasts days, weeks, or even months shouldn’t affect your long-term strategies. Though we can’t use the past to predict the future, the Standard & Poor’s 500 (S&P 500) has delivered average annual performance of 11.42 percent since 1928. Keep in mind that those years include the Great Depression, during which stocks lost 83 percent; the bear market of 1987 when stocks lost 33.5 percent; and the financial crisis when the S&P 500 dropped 57 percent before gaining 202 percent over the next six years.
3) DON’T BE TEMPTED BY EMOTION
Volatility makes for stressful investing, and it can be tempting to bail when stocks fall and ride out the bad times. Unfortunately, trying to time when to exit or enter markets is very difficult and not likely to work out in your favor. Research shows that investors are notoriously terrible at predicting market tops and bottoms. Corrections happen regularly, and periods of high growth often occur close to major pullbacks. If you’re not in the market when it rallies, you may miss out on the best days of performance.
4) STAY FLEXIBLE
Thriving during volatility doesn’t mean sitting by passively. One of the benefits of an active, flexible investing style is that we can make strategic shifts to take advantage of new opportunities that arise. As professionals, we are always looking for prudent opportunities to help our clients pursue their goals in changing market environments.
WHAT SHOULD YOU DO NEXT?
Though pullbacks and sustained periods of volatility are stressful, they are a normal and natural part of market cycles. As financial professionals, our job is to sort through the barrage of information and take a look at the fundamental factors underneath. Your job is to stay calm and focused on your goals, knowing that there is a serious professional who is taking care of the details for you. We will reach out to you personally if we believe that changes to your investment strategies need to be made in light of our analysis.
If you aren’t sure whether your portfolio is positioned properly for the current market environment based on the amount of risk that you’re comfortable with, we always provide a FREE 2nd Opinion Portfolio Review and would be more than happy to discuss your financial planning goals with you – please click here to schedule your meeting, or give us a call at 913.402.6099.
John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals. For more information, visit http://www.chladekwealth.com.
All written content on this site is for information purposes only. Opinions expressed herein are solely those of John P. Chladek, MBA, CFP®, President, Chladek Wealth Management, LLC. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual advisor prior to implementation. Investment Advisory services are offered by Chladek Wealth Management, LLC, a registered investment advisory firm in the State of Kansas. The presence of this web site on the Internet shall in no direct or indirect way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any state other than the State of Kansas or where otherwise legally permitted.
S&P 500 annualized average performance 1928-2015 includes dividend reinvestment.
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html (Accessed 1/5/17)
Yahoo Finance. S&P 500 price performance between 10/9/07-3/9/09 and 3/9/09-12/31/15