With blaring reports on increased COVID cases, a contentious presidential election, and natural disasters around the globe, it is no wonder you might feel like putting cash under your mattress and cuddling up with your family for a movie marathon. However, the natural reactions of fear and doubt many investors feel during volatile markets should not change their investment course or long-term resources. A smart financial plan will give you peace of mind no matter where the market currently stands.
Volatile markets are normal, and market volatility is a fact of doing business. A savvy financial advisor will help you understand that normal downturns are to be expected and can be an opportunity for additional investment strategies. On average, since 1926, stocks have dipped into bear market territory every six years, with losses averaging almost 40%. Historically, these stocks have recovered and delivered long-term gains. During these dips in the market, the trick is not to make negative reactive decisions but to stay the course with a solid financial plan. A clear financial plan will be prepared for market volatility and take these natural lows into consideration while also growing your assets.
The media serves us in reporting market fluctuations, but are we using their reports to trigger our investment decisions? News outlets are serving us just that: news. When fear and doubt creep in with incoming financial noise, we should not transform the media reports into our new financial advisor. The simple fact is that the reporters are not financial advisors. They are not responsible for our individual accounts and investment goals. Riding on the fear that news outlets often create (to create increased demand for news) does not equate to a healthy financial outlook. If you have done the work to develop long-term financial goals and a solid plan to achieve these objectives, then you can see market volatility as a normal part of doing business — not a call to abandon your plans.
· Market volatility is normal
· The media reports news and does not determine your financial plans
· A good financial plan plans for volatility
Justin Martin is a Senior Wealth Advisor for Legacy Wealth Management, with his office based in the Salt Lake City area. Justin works with small business owners and doctors throughout the United States and is passionate about helping individuals prepare for a robust financial future. Justin completed his Master of Business Administration (MBA) at Texas A&M University and completed his undergraduate studies at Brigham Young University. Justin is FINRA series 65 licensed, has been working as a Wealth Advisor since 2006, and is currently a board member with the International Association of Registered Financial Consultants. He also works as an adjunct professor of microeconomics and loves studying financial systems. Justin and his wife Megan have four kids and love all things active and musical.
This document is provided for educational purposes only. All investment strategies have the potential for profit or loss. No investment strategy can guarantee positive returns. The information contained in this document should neither be construed as a provision of personalized investment advice nor as a guarantee that a certain level of results will be achieved. Under no circumstances should this information be construed as an offer to sell or a solicitation of an offer to buy any particular service or product.
 Source: ISI, Bloomberg, National Bureau of Economic Research, Haver Analytics, FMRCo (Asset Allocation Research Team) as of February 26, 2020. Data based on S&P 500 Index price returns. Duration ends with a complete retracement of losses. Recessions are defined by the National Bureau of Economic Research.