Markets have certainly become more volatile over the last few weeks. News coming out of the White House, uncertainty around AI, and rising global tensions have all played a part in a fluctuating stock market. With stock market volatility on the rise, you might be wondering how to navigate these uncertain times and whether it's time to seek recession investment advice.
In times like this, you may be asking yourself what you should be doing with your investments. First, panic selling stocks is not the right answer. The stock market has had mid-year declines of 9-10% about ⅔ of years historically. Most of the time these sell-offs don’t last. Stocks rebound and finish the year higher. In fact, when the rebound comes, it usually happens suddenly. If you sold your investments during every 9-10% downturn, you’d avoid a bigger selloff sometimes, but much more frequently, you’d miss a big rebound. Missing those rebounds will do far more damage to your finances than avoiding the occasional bear market. In other words, staying consistently invested is extremely important to long-term investing success.
However, you also don’t want to ignore current events. The market is always in motion, with risks and opportunities constantly changing. A static, inflexible investment approach doesn’t work in a dynamic world. For example, market crash strategies could come into play if the market continues its downward trend.
At Facet, we take a dynamic approach to allocating investments. We start by developing a set of macroeconomic scenarios that we think cover the range of possible outcomes over the next 12 months. We then look across these scenarios for patterns. For example, are there types of investments that might build in some defense into portfolios without giving up too much upside? This type of financial advisor recession insight is critical to weathering times of uncertainty. By gaming out a wide variety of scenarios, you can see these tradeoffs, and attempt to find segments of the market where there is a favorable balance between risk and reward.
The other advantage of our scenario-based approach is that we come into periods of market volatility with a plan. For example, the potential for a trade war was on Facet’s list of scenarios dating back to last summer. Another of our scenarios was around growth in AI stocks slowing down. Right now it appears some version of both of these scenarios could be coming to pass. Having the foresight to put in place recession-proof retirement plans and portfolio risk reduction strategies allows us to act decisively.
Because our Investment Committee had already considered these possibilities, we’re not caught off guard when they occur. We had already built the portfolio knowing that it might need to withstand events like what we’re seeing right now. We may or may not choose to make further adjustments, but we can do so from a position of strength, knowing that our current portfolio allocation was built with current events in mind.
Speaking of plans, perhaps nothing is more important than having your investments fit your broader financial roadmap. When Facet builds a financial plan for our members, we assume that market selloffs will occur. We built the plan for resilience, knowing there would be down markets, potentially much worse than this. Having a long term investment plan strategy is a key part of managing finances in times of uncertainty.
Similar to the point above, this allows us to operate from a position of strength. If the downturn plan we assumed occurs, then there is no need to panic. Without a plan, people often wind up feeling unanchored. They react to every way the wind blows. When stocks are rising, they want to add risk to their investments. When stocks are falling, they question if their investments are too aggressive. Lacking a plan can wind up with you buying high and selling low, and this isn’t the way to achieve your financial goals.
If you’re wondering why the market is down today or feel uncertain about how to handle your investments during periods of inflation, it’s a good idea to have professional guidance. Having a financial advisor in volatile markets can help you stay grounded in times of market instability and avoid making emotional decisions.
All of this to say that controlling your emotions and remaining disciplined are the biggest keys to investment success. Unfortunately, market volatility tends to make it harder to remain objective. Maybe adjustments are warranted, maybe they aren’t. But that decision has to be made with a range of possibilities in mind if you want to have any chance at success.
This is where having experienced professionals at your side can make all the difference. Facet can help you feel more confident when planning your finances in a tough market and stay objective in your investment decisions. Our team provides expert risk management strategies and financial risk management advice, allowing you to help protect your retirement from recession and build a more secure financial future.
At Facet, we can help you manage money in times of recession, ensuring your portfolio is well-balanced, your risks are minimized, and your future financial goals remain achievable. Help prepare for the next recession by building a solid financial strategy today with our team of experienced professionals.
