What’s the Key to Relieve Anxiety Over Stock and Bond Price Drops?

Wild swings on Wall Street may be causing anxiety for many investors.

FEAR is REAL, especially when you have little idea how portfolio drops will impact your financial plan.

Investors Without a CFP® on their team are Anxious Over Stock and Bond Price Drops!

The key is obviously to get good professional help and have a plan in place ahead of time.

Those that partner with a CFP® or good advisor should be almost disinterested in Wall Street swings. It should be “no worries, “I knew this was coming, just not when, or why. My advisor told me it would and that I would survive just fine.”

What does an experienced Certified Financial Planner or investment advisor do when investment markets are flying around and the crap has hit the fan?

Long before these drops happened, a good advisor has been preparing for these swings. A good financial plan should be one that is able to withstand this kind of volatility whenever it rears its head. This is not about predicting when the next correction will be, but rather creating diversified portfolio’s that are able to withstand losing money on paper when the markets go down. For example, for many people, if the Dow Jones drops 10% and their portfolio only drops 6% they can live with it and not lose any sleep at night,

Did you hear that Amazon is down 25% from its high and The Dow Jones is down about 2,500 points from it’s 27,007 all-time high? On October 28th, the Dow swung about 900 points from high to low within the trading day hours! GREAT CLICK BAIT for internet, newspaper or TV headline!

Good advisors have prepared their client’s with a solid financial plan. A road map that will lay out their financial goals and what they can control to get them there. There was a time when I would manage client money without a financial plan. After a couple of client’s panicked and sold out in the 2007/8 Great Recession, I promised to never do that again.  if you are anxious about your investment portfolio, compare it to your financial plan to see the impact. If you don’t have a real financial plan designed by an independent Certified Financial Planner, then go get one prepared.

Investors that don’t have a plan may be freaking out right now! The “freak out” comes from the uncertainty that comes with not knowing how the current stock and bond price drops will impact their retirement and other financial goals.

DID YOU KNOW:

Over 90% of the S&P 500 companies met their revenue estimate for the 3rd quarter in 2018. This is the “Mother’s Milk” for stock prices in the long-term.  Did you know GDP of 3.5% for the third quarter means we are no where near Recession territory, rather a boom is here. The fact that many stock prices have dropped 10+ is probably a terrific long-term buying opportunity.

I really think that investment related experience matters going forward. Having been in the financial business back in 1987 when the market crashed, seeing the Dotcom bubble blow up and the Great Recession of 2007/8, it’s comforting to now that that stock market declines have always been temporary.

Telling stories of the benefit of being prepared really matters. My phone has not rung with a client call being worried about their portfolio for years. The reason is the comfort in having a plan. it also helps to know that market Corrections are normal and healthy for stock markets.

Imagine you are on a large sailboat going from NYC to London for your daughter’s wedding. It’s expected to be a 12 day boat ride, but you left three weeks before the wedding just to be safe. Along the way, you had some horrible luck and some unexpected storms made the sea too rough to stay on course. Your ship captain diverts from the normal route and informs you that you will be sailing away from London and may even go backward for a while, adding two days to your trip.

Imagine how upset and anxious you might be if you thought the bad weather would make you miss your daughter’s wedding! That’s what it feels like for people that invest when their portfolio drops and they have no certainty about being able to reach their financial goal(s).

In your case, while you were inconvenienced by adding a couple days at sea, you still had more than enough time to get to London and comfortably be there in plenty of time for the wedding.

The storm could be at sea or with investment values.  If everybody had a solid financial plan and didn’t care about a bad spell with their portfolio holdings, there wouldn’t be any viewers on CNBC or other financial channels. FEAR SELLS – PEOPLE WATCH

I didn’t get any client calls this month. Our ship’s lost a little time due to these rough waters.  Is your plan going to be OK?

Stock and bond prices might very well go down from here, but that is creating opportunities. There is usually more panic before we hit the low, I don’t think we are there yet. For long-term investors, you have yet another chance to buy into U.S. stocks while the DOW is under 25,000.

Lastly, take a look at the chart below. It illustrates the intra year low every year going back to 1979. As you can see, most years suffer a decline during the year and still end up ahead when all is said and done. I drill these kind of charts and points into the heads of my client’s heads. Maybe that’s why my phone never rings when markets go down.

This chart doesn’t reflect what has happened in 2018, but you can probably see that there have been many years with this kind of fluctuation. One thing is true is that EVERY downturn in the stock market has been temporary. The key is to have a plan and a portfolio that allows to you sleep at night so you won’t panic sell.

Is your portfolio ready for stock market drop?