Keys to Weathering Market Volatility

The recent turbulence in the stock market may be causing concern among novice investors, but experienced investors understand that what we have seen so far this year is not earth shattering. For context, investors who lived through events like the Black Monday crash of 1987, the Dot-com bust in 2001, the global financial crisis of 2008, and the COVID-19 market downturn, have gained valuable experience and a deeper understanding of equity market swings. Unfortunately, investors with limited experience may lack the perspective or the wisdom of those who have navigated the investment world for a longer period. Knowledge can help provide a general understanding of a topic and expertise can offer a higher level of skill and proficiency. 

In the competitive media industry, outlets often focus on sensational headlines to capture attention, sometimes amplifying investor anxiety in the process. During these confusing times, it is helpful to remember that volatility is a part of the investment experience, therefore, it is beneficial to understand or remind yourself how to embrace and manage times of investment turbulence. 

Volatility in equities, in simple terms, means price swings. The degree of variation of prices and the time period over which they occur determines the severity of the volatility. High volatility results in significant and rapid price changes, while low volatility leads to more stable and smaller price fluctuations. Typically, high volatility arises during uncertain times, such as the recent tariff proposals or the pandemic-driven crisis. 

Strategy

One of the best ways to prepare for volatility is to understand your objectives and strategy. We believe that a long-term investment strategy is integral to successful financial planning. Focus on your long-term investment goals rather than reacting to short-term market movements. Historically, over longer periods of time, equity markets have recovered from downturns. 

What NOT to do!

Seasoned investors understand that volatility is a natural part of the investing journey and that bumps in the road can and will occur. Those who have experienced challenging periods of volatility in their investing journey know that there are a handful of strategies that can make these times more manageable, as well as pitfalls that can complicate the situation. 

While most investors recognize the importance of time horizons and risk tolerance, they sometimes overlook a crucial factor: human emotion. Even the most experienced investors can be tempted to stray from their long-term plans and become caught up in the short-term fluctuations of the economic environment. Allowing panic and doubt to influence decision-making, and worrying about aspects beyond one's control, can lead to rash and poorly considered choices. You are the best evaluator of how you react to potentially stressful situations. If you would like to discuss your financial concerns with us, we would embrace the opportunity to speak with you. 

It can be very tempting to take money out of equities with the intention of reinvesting, “when the time is right.” However, attempting to time the market should not be a primary strategy. It is nearly impossible to determine when the perfect time is to get in and out of the market. Trying to time the market can prove to be highly risky, and many investors have missed out on significant gains by doing so.  

Minimizing your exposure to the media during volatile times can prove to be healthy. Consuming excessive media during uncertain times can increase stress and anxiety. Media coverage can often exaggerate the situation, making it sound worse than it truly is. While you cannot control what the media is dishing out, you can control how much you intake and how you react to the information. Remember the saying, “perception is reality,” because the media has done a good job at skewing and sensationalizing facts and many times their main goal is to increase viewership. Refraining from too much media can help you stay calm during times of uncertainty. Ignoring the talking heads and staying focused on your long-term goals is typically the most productive path. 

Seasoned investors know that trying to navigate investment decisions without consulting their financial professional can pose an unnecessary obstacle to achieving their financial goals. Seeking guidance during confusing times can help investors find the best path to success with their hard-earned money. 

Positive Actions

Maintaining focus on your personal financial goals should be your main priority. We strive to craft a diversified, long-term financial plan with clients that takes into consideration their time horizon and risk tolerance. We also try to help clients stay on track and avoid allowing temporary fluctuations in the markets to diverge them from their long-term path. While this may sound easier said than done, practicing patience can help you become more resilient to volatility. 

Constantly checking your investments, like every hour or even daily, can increase your anxiety. Please remember that investing for the long-term is never a straight line, and being consumed by the daily ups and downs can lead to increased concern. A well-diversified portfolio can include stocks that can weather short-term volatility and still allow the potential for long-term gains. 

As the great investor Warren Buffet said, “If you are not willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” 

Sometimes, the big picture can get lost when the weeds start to become the focus. If you would like to discuss your financial plan and review it to confirm it still conforms to your goals, please contact us and we would be happy to explore this with you.  

Opportunities During Market Downturns

Navigating turbulent times in financial markets can be difficult. They say if life gives you lemons, make lemonade – and there is a silver lining for investors and savers during market downturns.  

Here are a few ways you could enhance your personal situation when equities take a dip.  

• Add new money into your retirement or brokerage account. If you are in a financial situation that could allow you to make new investments, buying stocks during a market downturn can be a great way to potentially increase your long-term returns.  

• Rebalance your portfolio. When stock prices drop, they will account for less of your diversified portfolio if your investments in bonds have maintained their value or didn’t drop as much. Moving your portfolio allocations back to your desired amounts, or even increasing your allocation to stocks, can help set you up for potentially strong returns after the downturn passes. 

Our goal is to help you make sound financial decisions. As always, please call us if you are interested in making any changes to your portfolio. 

We Will Help You Stay Properly Informed

We are closely monitoring areas that may impact your financial situation. If you would like to review your financial holdings, rebalance your portfolio, or discuss any concerns or questions, please know that we are here to assist you. 

We believe that an informed client is the best client. We will keep you updated on issues that may affect your financial situation. 

Additionally, please keep us informed of any changes in your circumstances, such as health issues, shifts in your retirement goals, or the sale of a home. The more we know about your unique situation, the better we can advise you. 

A skilled financial professional can help simplify your journey toward achieving your goals. By understanding your needs and objectives, we can create a plan tailored to your situation. As always, we appreciate the opportunity to assist you with all your financial needs. 

Disclosure:

Advisory Services offered through Materetsky Financial Group Inc., a Registered Investment Advisor. Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. Private Client Services and Materetsky Financial Group Inc. are unaffiliated entities. All insurance products are offered through unaffiliated insurance companies. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Materetsky Financial Group, Inc. [“Materetsky]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Materetsky. Materetsky is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Materetsky’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.materetsky.com. Please Remember: If you are a Materetsky client, please contact Materetsky, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian. Note: The views stated in this letter are not necessarily the opinion of broker/dealer, and should not be construed, directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investors should be aware that there are risks inherent in all investments, such as fluctuations in investment principal. With any investment vehicle, past performance is not a guarantee of future results. Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. All indices referenced are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. The S&P 500 is an unmanaged index of 500 widely held stocks that is general considered representative of the U.S. Stock market. The modern design of the S&P 500 stock index was first launched in 1957. Performance prior to 1957 incorporates the performance of the predecessor index, the S&P 90. Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. Past performance is no guarantee of future results. CDs are FDIC Insured and offer a fixed rate of return if held to maturity. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. There is no guarantee that a diversified portfolio will enhance overall returns out outperform a non-diversified portfolio. Diversification does not protect against market risk. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. There is no guarantee that a diversified portfolio will enhance overall returns out outperform a non-diversified portfolio. Diversification does not protect against market risk.