Ideally your investment strategy was built on the following principles:
Understanding your own risk tolerance. Every investor has a unique tolerance to enduring losses and to resisting too good-to-be-true opportunities. Make Sure your portfolio is in-between these boundaries so that you do not feel the need to sell low or buy high.
Allocating your investments according to your risk tolerance and your portfolios’ ability to meet your investment goals. The largest risk you face is volatility. Make sure you balance volatile assets like stocks with less volatile assets such as bonds. Be sure to keep about eighteen months’ worth of investments in less volatile assets so that you outlast a bear market and don’t have to liquidate any depressed assets.
Maintaining portfolio diversity. Avoiding a concentrated portfolio, 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 should you 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
Keep optimistic: 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 Ryan Carney 716-597-3007 Ryan.Carney@WinthropPartners.com
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.
Ryan Carney is a Partner at Winthrop Partners. With nearly 10 years of experience in financial services, Ryan began his career with Fidelity Investments and First Niagara Financial Group. In 2018 he was named by Buffalo Business First’s as a “30 under 30” honoree. He earned his B.S. in Economics from Bowdoin College and is a Certified Financial Planner.