As COVID-19 and economic uncertainty continues to shake markets, I wanted to share some coping skills learned over 34 years
As COVID-19 and economic uncertainty continues to shake global markets I wanted to take this opportunity to share some coping skills that I have learned over my career. I have spent the last thirty-four years of my life in the financial services industry. During that time I have experienced Black Monday, the Savings and Loan Crisis, The Asian Contagion, the Tech Bubble, 9/11 terrorist attacks and the Great Recession.
Markets move based on numerous variables that no one person can meaningfully control or even fully monitor. And when stock prices falter, the resulting drumbeat of negative news reports can drive many people to flee the markets out of fear (and miss out on potential gains as financial markets regain their strength). But when others are pessimistic, you can reframe the situation as one of opportunity.
Here are some coping skills that may help:
1. Tune out the noise. It’s okay to not check your portfolio balance when the market is falling. Turning off the financial news might be smart if it keeps you from making mistakes based on emotional decisions.
2. Put us to work for you. We can help with more than just your investments. Financial Planning includes topics such as refinancing, cash flow planning, insurance planning, estate planning, education planning, small business planning, tax planning, charitable planning et cetera. You can improve your financial plan no matter what the stock market is doing. Our purpose is not only to help you stay invested but to assist you in creating a financial plan.
3. Phone a Friend. We want to be a calming voice during this troubled time. We have contacted every client several times since the COVID-19 crisis started. We will continue to reach out to all of you over the coming weeks. If there is anyway that we can be of assistance please call us. We are happy to help!
4. Avoid Social Isolation. This can be a threat to your portfolio as well as your mental health. It is important to maintain contact with your friends and family even if it’s simply over the phone. Be creative and find ways to keep your friends and family close.
5. Imagine life in 2022. It is best to think of this crisis as an episode. Market sentiment has been impacted by the global COVID-19 outbreak. How economic policymakers, public health officials, and consumers respond will inform market conditions over the near-term. What is clear is that this crisis will have a beginning, a middle and it will have an end. Stock prices are not permanent and will recover in time.
6. History doesn't repeat itself but it often rhymes. Think back to the lessons of the Credit Crisis in 2008. After the bank stress tests were done in March of 2009, the markets started to climb… way before the economy started to heal. The stock market is a forward indicator of the economy. It drops anticipating a bad economy and starts to climb anticipating a recovery.
7. Stay diversified. There is a reason to have a diversified portfolio. Bonds help dampen volatility. I have enclosed a slide from Vanguard that shows how staying the course can pay off and how abandoning the course can be costly. Portfolio models with more bonds generally recover faster than those with more stocks. Staying invested and diversified tends to be the best recipe for investing success.
I hope all of you and your families stay safe and healthy as we work together to overcome these challenges. It is my privilege to serve all of you and I look forward to being of service in the near future.
Timothy J. Watters, CFP® MBA