Podcast Episode 242: Investing During a Volatile Market

Today’s Wisdom:

The stock market has been in a state of volatility for much of the past two years but it seems like that uncertainty has ramped up even more in recent months. When we get into one of these up-and-down environments, what’s the best way to invest your money without taking on too much risk?

Want to save time? Click the timestamps below to jump ahead to specific spots in the episode.

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What You’ll Learn:

If you were hoping for a quiet and steady start to 2022, it doesn’t look like we’re going to get that anytime soon. Just look at some of the largest tech companies that have taken big hits already and earnings haven’t helped matters much either.

But these periods of volatility are inevitable when it comes to the market and there are ways to approach this when investing. On this episode of the Money Wisdom podcast, we’re going to talk about how to find the proper balance while limiting the amount of risk you’re comfortable taking.

When these turbulent times creep up, a lot of people will look to those large companies and blue chip stocks to find safety. An easy choice is an S&P 500 Index Fund but even that will be heavily weighted towards the top five or so companies. So while you think you’re taking a safer approach, you still end up being heavily invested in a small number of companies.

You’ll hear us talk about it a lot but it’s important to focus on diversification. This is even more true for those people that are at or near retirement and don’t want to take on all the risk of the market.

It’s okay to own the S&P 500 fund but you also might have a small cap fund and an international fund for instance. Finding different types of equites that fall into various categories helps mitigate some of that risk.

Diversification also means you should probably have some safe money, whether that means owning CDs or fixed annuities. There are some options beyond a traditional savings account that will allow you to still generate growth but limit your upside. It’s all about finding that right blend that allows you to stay exposed to the market while also keeping enough safe money to ease your worries.

These volatile times are also a great reminder that working with an advisor will serve your needs best. Having someone that’s focused on your goals and finding the investments that best aligns with them will give you the best long-term outcome. Working with someone that’s just trying to push you into certain investments and selling you on specific products should raise a red flag.

It shouldn’t always be about the product. For us, it’s all about the plan. Our clients might not know every product that we’ve identified for them. Remember, there’s nothing wrong with a stock broker. The issue arises when that broker acts as if they’re an advisor.

So listen through the podcast and hear what Joel Johnson has to say about this current environment we’re investing in and make sure you reach out with any questions you have.

[0:32] – Volatility in the stock market

[2:46] – Index funds safer?

[4:48] – Strategies for diversification 

[6:57] – Is your advisor focused on planning or selling?

[8:50] – How our process has evolved

[12:35] – An overview of our process

Thanks for listening to this episode. We’ll be back again next week for another show.

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Final Thoughts:

“You’ve got to have good diversification. The game here is, for you to win, you have to stay in the market with what’s exposed to the market.”

– Joel Johnson

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