Riding through Market Downturns
I’m Holly Carroccio, Financial Advisor and Managing Member of Nexus Advisors. Welcome to my video blog about various financial topics to help our current and future clients.
So far this year, it has been a really tough time to be an investor. We have watched the equity market trickle down and further down as news of inflation, the Ukraine war and rising interest rates is digested by investors. First let’s define something.
So, what has happened as of today? The S&P peaked on January 3rd and is down 12.9% since then as of yesterday May the 4th, and so far this year, and appears to be getting worse before it gets better. Everyone understands that market downturns are part of the process of being an investor, but that doesn’t make it fun or easy. In fact, it is downright painful and for many people sparks a lot of fear and anxiety.
Let’s think about investing as an analogy of being along for a ride in a boat. You trust the captain and you also feel that the boat is solid enough to carry you through rough waters. However, all of the sudden, storm clouds roll in and the water starts to get VERY turbulent. You look around and see people on the deck, and you notice that some people are getting ill and turning green. Then you see others, who seem to be enjoying themselves, as though they are on a great adventure. You feel yourself identifying more with the ones who are sick to their stomachs. You start wondering Maybe it would be better to jump into a lifeboat and travel to an island where you can rest until the storm passes and things are calmer. But you also understand In contemplating this idea, that maybe this storm is temporary and maybe if you jump out of the boat you’ll be left
This analogy is much like investing. We want to get AWAY from perceived danger. It’s in our DNA as humans to protect ourselves and to do SOMETHING under stress
So what can we actually consider doing?
- Put yourself on a news “budget”. Try not to watch every financial news report that comes out. Remember, news channels are paid to get your attention, and nothing sells more than negative news. If you watch the news and get an update on the markets once per week, in my opinion you will be caught up.
- Stay the course. In most cases, over decades of market history, portfolios perform better over long periods of time when investors are patient through downturns. History has shown that in order to gain the average returns of the market, means you have to stay IN the market over the long run.
- Act like the professionals. Big investors, like Warren Buffett, use market downturns as a time to add equities to their portfolio. You can take advantage of downturns and lower prices. This doesn’t mean you will benefit immediately, but over time, this strategy has shown to improve performance.
Of course, markets are volatile, and it’s important to make sure your investments match your willingness to tolerate risk – the up and downs and your time horizon. That’s what we are here for, is to help discern how to navigate through both the sunny and calm days as well as through troubled seas.
This information is educational and is not advice or a recommendation for any specific investment product, strategy, or service. The views and opinions expressed are those of Holly Carroccio only. Any examples used are generic, hypothetical and for illustration purposes only. Investing involves risks, and past performance is not indicative of future results.
Holly Carroccio is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC (www.SIPC.org). Nexus Advisors is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. 14241 Dallas Parkway Ste 1200, Dallas TX 75254