Today’s Wisdom:
When the market is going strong and the economy is booming, you don’t find yourself worrying too much about your finances. But when times get a bit more challenging, like we’ve seen recently, doubt can start to creep in. Today we’ll tell you which questions you should be asking during difficult markets.
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What You’ll Learn:
It’s never easy to control your emotions and ignore the noise when markets are choppy. It’s easy to question what you’re doing and wonder whether you’ve made the right investment decisions.
That’s why it’s always best to put a plan in place that you know will put you in a strong position no matter what happens with the market. Working with your financial advisor to do that is step one and we have a lot of experience in good times and bad. On this episode of the Money Wisdom podcast, we’re going to share the questions that usually get asked during turbulent times and we’ll provide some answers as well.
We’ll begin the discussion with risk because that’s what you feel immediately during a down market. What types of risk should you have? When you talk about managing risk, we start by making sure you understand you shouldn’t put all of your money into anything.
We all know that, right? What we don’t realize is that we’re often spreading our money out into different investments but don’t realize that it’s just a different version of the same thing. That’s why it’s so important to know and understand exactly what you are buying. This ensures that taking the right types of risk because you’re staying balanced and not totally reliant on one thing, whatever that one thing might be.
Once you know what types of risk you should take, it’s then time to figure out how much risk you need in your portfolio. The simple question you need to answer is, ‘How much money do you need?’ Determining that helps you build a plan that makes sure you are taking enough risk to reach your goals while not putting everything you’ve built in jeopardy.
The next area that you might be wondering about during difficult markets is what happens when things start moving up again? Are you positioned to benefit when a bull market begins? We might joke about keeping money in the bank where it’s not generating any return, but you need to have the safe money for an emergency. It’s also important that we have money set aside to take advantage of a down market. Without a plan, most people just end up selling one investment for cheap to buy another investment for cheap with the hopes that the new one increases faster.
On the other side of things is an extended bear market. The question you need to ask yourself is can your portfolio survive if the bear market continues longer than anyone anticipates? Will that downward pressure drive you towards a disaster? If you end up relying solely on the market for income and it stays down for some time, that could end up wrecking your retirement. That’s why we run scenarios that allow you to see what the upside and downside of your portfolio could be.
All of these questions get discussed by our team when you come in and work with us. It all begins with that Money Map review process that helps us get to know you and your goals better and then allows us to build a plan to match. Whether you work with our team or not, make sure you are working with someone you trust and feel comfortable with because they’ll have your back during difficult times.
[1:21] – Taking the right types of risk
[3:02] – Right amount of risk
[4:28] – Are you positioned to benefit in a bull market?
[8:49] – What if it’s an extended bear market?
[11:00] – Am I talking to the right people?
[12:47] – How we make clients comfortable
Thanks for listening to this episode. We’ll be back again next week for another show.
Final Thoughts:
“You also don’t want to put your money into 10 different versions of the same thing with a different name because all we’ve done is added complexity with no actual diversification or balance to it.”
– Eric Hogarth
3 Related Items & Resources
- What Does it Mean to Retire Early?
- Investing During a Volatile Market
- Unique Retirement Planning Challenges We’ve Seen
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