The future is unknown, and the unknown can be unsettling—or even downright scary. Billionaire and founder of Patagonia, Yvon Chouinard, said, “Fear of the unknown is the greatest fear of all.” And things in our world right now are just about as unknown as it gets. Most of us dislike this level of uncertainty (to put it mildly), but do you know what dislikes it even more? The market.
Case in point: the Dow recently experienced 8 weeks of consecutive losses this year, and the S&P 500 tallied 7 weeks of losses. (1) As a result, many economic leaders are predicting a recession in our near future. (2) We can point to many factors as the cause of our recent nail biting: rampant inflation, the Fed’s solution of increasing interest rates, and international unrest. The fact remains that we have no control over any of that.
For better or worse, we at Wealth Advocate Group want to help you take a deep breath and walk through whatever our markets decide to do. Here’s how we’re watching over your finances and taking proactive steps to help safeguard your wealth.
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 decisions with you and offer investment recommendations, 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.
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.
We also watch over your money like a hawk, and when it’s time to get out of an investment because the risk is rising, we will contact you about adjusting your allocation.
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 potentially 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 likely hold liquid investments like cash or short-term bonds. Because retirement can last decades, you may still want some of your money in investments that can 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.
I’m sure you’ve heard the motivational slogan “Keep calm and carry on.” When it comes to investing, we’d do well to heed these wise words. In fact, a top investment rule is to refrain from making emotional decisions, as it can be easy to get swept away emotionally when the market wreaks havoc on your finances. However, if you stay true to your investment strategy and avoid making decisions when emotions are running high, you may avoid losing even more.
Keep in mind that bear markets have happened before—and they will happen again. If you’ve created a disciplined financial plan and have a trusted advisor monitoring your money, you’re doing your part to prepare. But do you need someone to turn to when the market gets wild?
Our Wealth Advocate Group team advocates for what is most important to you, and we prioritize financial education, meticulous planning, and clear guidance for your family and your future. We’d love to support you as we work together to help build your finances for a strong future. To get started, reach out to us at Contact@Wadvocate.com or 440-505-5578 to schedule an introductory consultation.
David Thorne is CEO at Wealth Advocate Group, LLC, an independent, fee-based wealth management company based in Beachwood, OH. With over 25 years of experience, David specializes in working with executives, helping them create proactive strategies for incentive and non-qualified stock options, restricted stock (RSUs), and concentrated stock positions. David is known for delivering a high level of service to his clients through Wealth Advocate Group’s caring-first, relationship-based approach. Dave has a bachelor’s degree in finance and psychology from Kent State University and is a CERTIFIED FINANCIAL PLANNER™ professional. He has also been a featured guest speaker for several financial service associations, focusing on executive stock option planning and risk management. When he’s not working, you can find David spending time with his wife, Tiffany, and their three adult daughters. He loves participating in all types of fitness activities, including snowboarding, mountain biking, and hiking with his dog. To learn more about David, connect with him on LinkedIn.
This material was prepared for David Thorne’s use.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Asset allocation does not ensure a profit or protect against a loss.
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(1) https://finance.yahoo.com/news/stock-market-news-live-updates-may-31-2022-111708003.html
(3) https://www.lifehealth.com/navigating-retirements-fragile-decade/
