A Bucks County Investment Manager and Fiduciary Suggests the Keys to Investing in Down Trending Markets: Perseverance, Patience & Optimism – In That Order

Hopefully you have already created an investment strategy based on the following principles:

#1 Identifying your risk tolerance. Know thyself.   Every investor has a unique tolerance to enduring losses and to resisting too good-to-be-true opportunities.  Make Sure your portfolio rests between these boundaries so that you do not feel the need to sell low or buy high. 

#2 Allocate your investments according to your risk tolerance and your portfolios ability to meet your investment goals.  In the investment business the primary risk is market volatility.  Make sure you balance volatile assets like stocks with less volatile assets such as bonds.  Be sure to keep about 12-24 months’ worth of investments in less volatile assets so that you don’t have to liquidate depressed assets.

#3 Maintain a diversified portfolio. Don’t put all of your eggs into one, even a few baskets.  Make sure you diversify your securities along sector, capitalization, geographic and quality ranges. 

Assuming you have developed a balanced and diversified portfolio that meets your risk and investment requirements what does a professional investment manager do in a market downturn?

Step 1) Perseverance: Stay the course with your strategy and avoid the temptation to sell out or cut losses.  The market is always trying to get you to make the wrong move so ignore it.

Step 2) Exercise Patience: Overall the market has always delivered new highs no matter how bad the downturn.  Sometimes after a correction the market snaps back quickly as it has done over the last decade and sometimes after a prolonged downturn like in the 1970s the market takes a longer to reach new highs.  Be patient and don’t try to anticipate or time the market

Step 3) Optimism.  You know the market will eventually rise, but what to do while exercising patience, depending on your portfolio you might just want to keep on investing in the same securities (Dollar Cost Averaging).  Alternatively, you may want to take the opportunity to sell, wait 30 days and repurchase these securities to create tax losses to offset future gains (Tax Loss Harvesting) or simply build up cash balances for future investments yet to be identified. 

If you are concerned about your investments in today’s down trending markets and you would like to benefit from a conversation with an experienced and impartial fee only fiduciary like Winthrop Partners, contact Thomas Saunders 267-448-3139 [email protected]

Disclosures:

The views, opinions, and content presented are for informational purposes only. They are not intended to reflect a current or past recommendation; investment, legal, tax, or accounting advice of any kind; or a solicitation of an offer to buy or sell any securities or investment services. Nothing presented should be considered to be an offer to provide any product or service in any jurisdiction that would be unlawful under the securities laws of that jurisdiction. Past performance is not a guarantee of future results.