When I am not working with clients to better their financial situation, I enjoy spending time in nature. Being outside clears my head and makes me feel more grounded. My business partner is going to Alaska this year so we have been talking about bears a lot in the office. In light of the recent news that the S&P has fallen into bear market territory₁, I thought it would be helpful to provide some best practices for when you see a bear (market).
- Don’t make any sudden movements: While it can be tempting to move out of stocks into anything else, it is not helpful for your portfolio to be making sudden movements. Just as you would with a bear in the wild, you want to move slowly and carefully. Remember that you had a plan before the bear market – and if you don’t yet have a plan now is the time to make one. If you are a client of ReFrame Wealth, we have taken multiple bear markets into account when we built your customized financial plan. Don’t react emotionally to the downturn – talk with a planner and use data to guide your decisions.
- Go a different way to get to your destination: In the wild, and in the market, unexpected things happen. The best way forward is to adapt to the new information and adjust as necessary. Therefore, we recommend frequent check ins with your advisor. The market downturn provides opportunities like rebalancing to buy stocks at a reduced price or tax loss harvesting to create tax benefits for your family.
- Make noise when you walk on the trail: When walking on a quiet trail, it is recommended to talk louder to prevent startling a bear. In financial planning, it can be helpful to talk with someone else about your plans to prevent making decisions in a void. Work with an advisor to understand your options and make an educated decision about where you want to go next. There will always be bears on the trail, but together we can go around them safely.
- Don’t leave food out – pack it away securely. When I am camping in bear country, the last thought I have at night is often – “did I put all the food away”? In the outdoors, you should pack your food in bear bags to keep the bears from stealing your provisions. In the markets – you should protect your profits from getting eaten by the market downturn. No one has a crystal ball, but we do know that market volatility goes both ways. Therefore, we recommend setting a target percentage for each investment type (aka “asset class”) in the pie chart of your portfolio. And when one slice of the pie grows bigger than your target percentage, sell a portion to get back to target. This process, known as rebalancing, can keep the portfolio from being exposed to excess risk. Rebalancing also helps you to strategically protect your profits when the markets turn bearish. As an advisor – I can rest easy knowing that we care for our clients’ profits with our rebalancing strategy.
While it is fun to play with puns, we know that shifts in the market can be extremely unsettling. Our financial professionals are hard at work to help clients navigate this trying time. Don’t go it alone – give us a call we are happy to walk with you.
Source: ₁ https://www.wsj.com/articles/global-stocks-markets-dow-update-05-24-2022-11653379171?mod=hp_lead_pos1
This content is developed from sources believed to be providing accurate information, and provided by ReFrame Wealth, LLC. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.