By the Wealth Management Resources Team
It’s no secret our world is a bit uncertain these days. It feels like we’re constantly waiting for the other shoe to drop. If you’re like most people, living with this level of uncertainty day in and day out can be stressful. As much as we may not like living with instability, the market likes it even less.
Market indices have been plummeting lately, amplified by investors purging stocks due to recession fears. As of June 1st, stocks rose slightly, with the S&P 500 gaining 1.8%, breaking a two-day losing streak. (1) The overall outlook, however, is that there is a downward trend. As of mid-May, the S&P 500 was down nearly 20% from January’s high, briefly dipping into bear market territory. (2) Even the big guns were not immune to a drop, with Amazon and Apple posting declines, among others. (3, 4) Many economic leaders are predicting a recession in our near future. (5) There are many factors we can point to as the cause of all this unpredictability, such as rampant inflation, the Fed’s solution of increasing interest rates, and international unrest, but the fact remains that we have no control over these variables.
At Wealth Management Resources, an important role as your trusted financial advisor is to help guide you through these difficult, turbulent periods. Here’s how we are watching over your finances and taking proactive steps to help secure 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 are part of a long-term investor’s experience. We also use asset allocation “buckets” that divide your wealth into short-, intermediate-, and long-term strategies to help you weather the rough periods without disrupting your planning objectives.
In times like these, it’s even more important to have an emergency fund or a percentage of your portfolio in cash if you need it for unexpected circumstances. While cash investments may not provide much growth, having a contingency fund with at least one year’s worth of living expenses can protect you against having to sell investments at low values to free up cash.
We Understand Your Risk Tolerance
Do you know that feeling in the pit of your stomach when you make a risky decision? Our goal is to help you avoid that feeling when it comes to your investments. Before investing any of your money, we help you determine your risk tolerance—the degree of uncertainty that an investor can handle. We know that an investor’s risk tolerance may change with age, income, and financial goals; that’s why we periodically review your risk tolerance and adjust your investments over time as needed.
We review client accounts regularly, rebalance the allocations at least twice a year, and make adjustments to the investments depending upon their performance, their role in the portfolio, and market conditions.
During bear markets, it’s important to remember that losses only become “real” when investments are sold, so it’s critical to reexamine your investment plan and long-term objectives before you sell. Reviewing your short-term cash needs can also help with decision-making. 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”(6)), a recession could 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 could likely have more stable 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 a portfolio allocation at retirement could look quite different from that of a 40-year-old in the peak of their working years.
We Are Your Emotional Support System
Refraining from emotional investment decisions is often easier said than done. A declining market is no fun for most investors and even seasoned pros are not immune to concern. The key is to maintain your investor discipline and remember that enduring periodic declines are the price we pay for potentially better investment returns over time.
Bear markets come and go. Success in getting through them often includes having a well-crafted financial plan and working with a trusted, fiduciary-minded financial planner. If you aren’t currently working with an advisor, we’d love to support you and help you build your finances for a strong future. To schedule an introductory appointment with me, connect by calling (401) 356-1400 ext. 112 or by emailing email@example.com.
Alexander Medici is vice president and investment analyst at Wealth Management Resources, Inc., an independent, fiduciary financial planning and investment management firm providing simple-to-understand guidance and solutions that help their clients pursue their goals. Alex has more than 15 years of experience and currently holds his FINRA Series 7, Series 63, and Series 66 licenses. He earned his bachelor’s degree in finance from the University of Rhode Island, as well as his Master of Business Administration in Finance from Suffolk University. In addition, he has earned the Certified Investment Management Analyst (CIMA®) designation from the Investment Management Consultant’s Association (IMCA) at the Wharton School of the University of Pennsylvania. Alex serves our broker-dealer customers as a Registered Representative and our investment advisory customers as an Investment Advisor Representative. To learn more about Alex, connect with him on LinkedIn.