No one can deny that we are in the thick of things right now. Between a global pandemic, economic worries, and political uncertainty, it’s no surprise that we are seeing increased market volatility. All of this uncertainty may be causing you to wonder, “How will this affect me?” or “Will my portfolio recover?”
While the severity of these events is not to be minimized, we can battle fear and anxiety by going beyond the headlines and educating ourselves with the facts. With that in mind, here are 4 ways that can help prepare your finances for more volatility.
1. Don’t React; Research
This concept applies to many areas of life, but it’s extremely valuable to remember when it comes to making any hasty changes to your financial plan. News outlets want to catch your attention, which means they are prone to exaggerate information or possibly not include comparisons that would clarify what their information means. This can be frustrating.
Here’s an example of a comparison that provides some context for how things can seem much worse than they really are. The stock market dropped 7% on March 9th, 2020, which was the largest drop in over a decade. (1) But what wasn’t mentioned is that the stock market prices decreased to the same value as they were on January 9th, 2019. (2) Was anything important or scary happening in January? Nope. It was just how the market fluctuated on that particular day.
2. Consider Long-Term Results
Now that we know to do a little research instead of making desperate moves to potentially save our money, here’s an analogy that will give us perspective as to how the stock market and our investments behave. People’s moods can fluctuate on a day-to-day basis and so can the stock market. However, if you look at someone’s personality over a long period of time, their moods average out and usually improve with maturity. This probably doesn’t apply to everyone you know, but stay with me! In the same way, the stock market is stable over time. The value of your investments also grow and mature with time, even with short-term ups and downs.
Here is a graph that shows this long-term stability, despite short-term market fluctuations. This is the Dow Jones Industrial Average (DJIA) showing over the last 30 years of investment value, which is a fair representation of the market as a whole if you are an average investor.
If you remember the 2008/2009 crash, as seen above, the market recovered really well. The market always recovers, and it will continue to do so.
3. Hands Off
Based on what we’ve covered so far, what’s going to happen when we ride out the stock market roller coaster and keep investing consistently? We will experience growth, work toward financial confidence, and save ourselves a lot of stress when future downturns come.
When the stock markets go down, you can think of it like a Black Friday or Cyber Monday Sale, where stocks and mutual funds are on sale and you’re getting the best deal on your money. However, if you choose to sell back your funds, or, staying with our example, return a previous purchase you bought for full price, you will get a fraction of your money back. You’ll lose money.
If you consistently invest and don’t take any money out until retirement, you don’t need to worry. Don’t become frantic and start selling back everything you bought for a much higher price. Let it grow and mature.
4. Talk To A Professional About Risk
You can do all the research you want, but ultimately, it’s extremely beneficial to talk with someone who researches this information daily and can help answer concerns specific to your situation and phase of life.
Depending on your age and financial circumstances, you might not feel like you have as much time to let the market bounce back. This is why it is even more important to make sure the types of investments you have align with your risk tolerance and time horizon. Lower-risk funds don’t go up and down as much as some other more aggressive-growth funds. Are you ready to see all your options for ways to help protect your money and setting it up to succeed in any market environment? Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 to get started.
About Brett and John
Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees in Business Administration and Economics. Brett is Life Insurance licensed in several states.
John Mc Kean, financial advisor, joined Comprehensive Advisor in 2016. He has been in the financial services and retirement planning industry for over six years. John is Life Insurance licensed in California.
Brett and John previously worked as Registered Representatives with Securities America, one of the largest independent broker/dealers in the country, and currently offer advisory services through AE Wealth Management, LLC. Both are passionate about helping clients on retirement planning. They take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Comprehensive Advisor are not affiliated companies. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 582548
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