The uncertainty of the last couple years just won’t quit. There’s no way to tell what’s around the corner, and that can be downright scary. In fact, billionaire and founder of Patagonia, Yvon Chouinard, said, “Fear of the unknown is the greatest fear of all.” 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.
Whatever our markets decide to do—good or bad—we at Match Point Financial want to help you take a deep breath and walk through it. 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.
We Know Your Risk Tolerance
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 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 hold safe 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 your portfolio will look very different from that of a 40-year-old in the peak of their working years.
We Are Your Emotional Support System
If the market is wreaking havoc on your finances, avoiding emotional investment decisions is 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.
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 Match Point Financial team would love to support you as we work together to help build your finances for a strong future. We provide comprehensive financial planning in the context of a long-term partnership, and you can expect personalized services along with clear communication and transparency every step of the way. To contact us, call 352-207-8014 or schedule a complimentary phone call using our online calendar.
Chris Reed is a financial advisor and the founder of Match Point Financial. Since 2002, he has been helping people make informed choices with their money and pursue their financial goals and objectives. He started his career with MetLife and has continued seeking to provide his clients with the best possible service through A.G. Edwards, UBS, and, finally, through partnering with Cetera Advisors LLC and forming his own independent firm in 2010. Learn more about Chris by connecting with him on LinkedIn or register for his recent webinar: Are Your Old 401(k)s Collecting Dust and Losing You Money?
Financial Advisor: Securities and advisory services offered through Cetera Advisors LLC, member FINRA/ SIPC, a broker/dealer and a Registered Investment Advisor. Cetera is under separate ownership from any other named entity.