By Adam Oerther, CFP®
As most of you know, the stock market was quite volatile in 2018, particularly in the last quarter. For some of you, this volatility may have invoked feelings of worry or nervousness over the future of the market; others may have felt indifferent about it, as the stock market is known for its “ups-and-downs.” What may come as a surprise to you is financial advisors go through similar emotions when the market goes through periods of increased volatility, albeit for somewhat different reasons. I love volatility because it gives me the opportunity to educate those who may not be well-versed in financial matters on “what it all means,” but, at the same time, I hate it, because it can cause clients, friends, and family to worry, stress, and lose sleep—as a naturally empathetic person, this can really get to me. Let me explain further by recalling two phone calls I recently received from two separate clients regarding the recent market volatility.
The first call came from a newer client who started doing business with us within the last couple of years. He mentioned he had been watching the news and saw the Dow Jones index had dropped a few hundred points, and it was making him feel uneasy—he felt like something should be done with his portfolio in light of such a change in the market. I wished I could simply click a few buttons and make his discomfort go away, but, I took the opportunity to educate him instead. I explained that while I understand why he feels we should be making changes to his portfolio, we prepare for these situations in a proactive—rather than reactive—way to avoid letting emotions dictate our investment decisions during volatile times like this. Additionally, I reminded him of the bigger picture and the process we had gone through to get him, and his family, to this point.
I explained we started our professional relationship with him, as we do with all of our clients, by first determining his current financial position, his personal and financial goals and aspirations, and the time frame in which he desired to reach these goals. Then, we collaborated with him to design and implement a comprehensive financial plan to address any potential threats toward—or opportunities for—reaching the goals and to invest his assets with the appropriate amount of risk being taken, given his needs and objectives. Since implementing this plan, we have monitored and managed his assets on a regular basis to ensure we maintained a level of risk that is appropriate for his personal circumstances. We have also been diligent about communicating with him at least quarterly to determine if any changes need to be made to the financial plan, based on changes in his life (marriage, having children, planning to buy a home, etc.), as these are the events that should necessitate a change to his investment portfolio, not the day-to-day “ups-and-downs” of the market.
A couple of days later, a more “seasoned” client, the female half of a married couple who has been with our firm for over 15 years, called regarding a need for some cash from their portfolio for a trip they were taking in the near future. She also mentioned the volatility of the market, just as the client from a couple days prior had done, but it was with more of a fleeting kind of tone, almost as if she was asking about the weather. “You must be getting a lot of calls with all of this volatility,” the client started. Indeed, we had received a few calls, and I let her know. “Well, you know us; we’ve been with you all for many years and have been down this road before, so we trust you’ll keep doing whatever needs to be done to keep us safe.” As you might imagine, this brought a big smile to my face. Nothing is more satisfying to me than hearing words like that from a happy client—it’s an excellent reminder I’m in the right profession and our firm makes a difference in our clients’ lives in a very meaningful way (it’s also why our tagline is “invest in a good night’s sleep”!).
So what can—or should—you do when the market gets volatile? Here are a few things to keep in mind:
1.) Keep the bigger picture in mind: Why are you investing in the first place? When will you actually need this money, and is a relatively short period of volatility enough to cause you to not meet your goals?
2.) Discuss with friends and family: Money can sometimes be a point of contention, even within otherwise tight-knit families, but, while money doesn’t literally “make the world go ‘round,” it is an important topic that should be discussed. Just remember you may have different financial goals than your friends and family, so don’t try to apply everyone else’s solutions to your own situation.
3.) Set up a meeting with a financial advisor: That’s what we are here for! Whether it’s to review your portfolio or begin a relationship with the advisor, we strongly encourage you to speak with a financial professional if you are feeling uneasy about the market.