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Stay The Course

Stay The Course

March 13, 2020

Joe, Gayle and myself  were having lunch a few weeks back, we tend to find a question then pose it to one another so not everything is business and we keep growing in getting to know one another. This time I asked the question, “Have you ever battled fear?” I mentioned that one of my grandsons is battling fear so I was helping him with ideas on how to replace his fear while at the same time having empathy, these monsters feel very real to him.

Joe shared that a fear he battled was a face off with a big shark like the one in the movie Jaws. For those of you who don’t know, Joe is an avid fisherman. On one trip, he was fishing off the coast of Catalina, they happened to pull in a large bass, one which happens to be illegal to keep, so they had to release it back into the ocean. While his fishing partner was getting the equipment ready, Joe had to hold this large bass in the water because the fish’s bladder expanded when the fish was brought to quickly to the surface. This can result in serious injury to the fish, and if released in this buoyant condition, the fish may float away and die. So while his fishing partner was getting the proper gear together to release the fish, Joe was thinking of Jaws and that a great white shark was going to come up and grab the fish taking his hand with him or even more, since this is jaws, we’re talking about!

That brings me to the coronavirus and accompanying stock market plunge. We all have gut reactions to news like this. Many of us can experience panic and fear, this fear can feel so real. I know, it’s happened to me as I mentioned in our last blog post. If you sense this happening, try these three steps:

Have a roadmap and if you don’t have one, call us or email, we will help you. Instead of reacting to the news, each of us needs a plan that’ll keep us on course.

Something we feel strongly about with our clients, is having a financial goal roadmap. This is why we build a plan according to your goals and desires financially which includes your risk profile. Here we talk about your concerns and your overall financial well-being.  We each have these goals which could be having an emergency fund, pay off debt, grow our wealth, start a business, even leave a legacy but once we start that down that path, we need to stick with it however tempting it might be to veer off the path. Our scary imaginings take on momentum and whisk us away from the here and now and drop us into an imagined future that can leave us feeling panicked and uncertain. 

Know your risk tolerance. Look back at some of the decisions you might have made in fear and discover how you might have made a different choice looking back. Really consider your own tolerance. Think about what you might do when you are stressed? Do you overeat? Do you movie binge? Think about those things that cause you the greatest stress, then work to counteract them. Sometimes, it is just getting up and taking a walk, setting aside food, or movies just making a small change helps. However, make yourself aware of your tendencies in whatever situation.

Similarly, we all need to set up a financial plan to help us live with through the ups and downs of the financial markets—especially the downs but keeps us on track with our goals. Have we positioned our assets correctly,  are we taking the right amount of risk, and remember why we’re investing, it’s a lot easier to stay disciplined and on course with a plan.

When working with couples, we have noticed there are differences in their risk tolerance profiles, these are great talking points. And it is not always the man who has a higher risk tolerance.

Adjust if needed. While we all can have a tendency to react based on gut instinct, we also have the ability to perceive what we might need to change ourselves then correct our behavior. Ask yourself a question, how are you feeling and reacting to the markets fluctuation and turmoil? Does your plan need to change based on what you know about your own risk tolerance? We can say one thing when the market is doing well but do something entirely off course, like real time adjustments is our risk-tolerance when faced with uncertainty.

While young, working and growing your income, this could be a great time to buy into the market, you could increase your contributions to your 401(k) or your IRA.

If you are older, you might want a more balanced portfolio and if you are in stocks and bonds, this is not the best time to sell but gradually decrease your stock holdings over the next 18 to 24 mos and be more conservative or consider other options to adjust the overall risk profile of your portfolio.

If you are older, and already retired you might have already planned for a downturn but if not, you might want to consider insurance options so that you protect your principle or income despite what happens in the market.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. Past performance is no guarantee of future results.