How to Cope With Market Volatility

Posted: April 12, 2016
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The investment markets had a rocky start in 2016, and many analysts believe market volatility may continue to be a theme throughout the year.

Market volatility is a tough factor to deal with. It inherently makes us want to react, to change, to make things smooth and even keel. It may cause stress when you know that your investments can be impacted by elements completely out of your hands.

But there is something you can control in that regard. It’s your financial objectives -- your short- and long-term goals. If you’ve put strategies in place to help reach those goals, we believe volatility shouldn’t necessitate changes in most situations.

We always talk about “staying the course” but recognize that it’s easier said than done. If your situation changes, if your financial goals change or if you just need reassurance that your  financial plan is on track for your retirement income goals, feel free to reach out -- that’s what we’re here for. And periodically, we’ll reach out to you to help reassess your plan and ensure it’s still on track.

[CLICK HERE to read the article, “Poll: What the Market Volatility Is Telling Investors,” from Morningstar, Feb. 21, 2016.]

The Greek philosopher, Heraclitus of Ephesus, is quoted as the first to state, “Change is the only constant in life.” The same is true with investment markets. Today, there are plenty of people with their own philosophies on how to manage the constancy of change in the investment industry.

Jack Bogle, founder of the Vanguard Group, reiterates his mantra that investors should “stay the course” in this volatile market. He offers a rule-of-thumb strategy for volatility: 60 percent to 40 percent stock-to-bond ratio. In his words, “If you’re younger, a lot higher, if you’re older ... somewhat lower.”

We believe this may be good advice in general, but it doesn’t take into account personal factors such as investment timeline and tolerance for risk. For that, you should consider working with a  financial advisor to discuss your financial situation, risk tolerance and investment objectives. We will work with you to identify strategies utilizing both investment and insurance products that may help you address your concerns.

[CLICK HERE to read the article/view the video, “Don’t panic about market volatility: Jack Bogle,” from CNBC, Feb. 17, 2016.]

[CLICK HERE to read the article, “Mitigating the financial and emotional impact of market volatility,” from Columbia Threadneedle, Feb. 8, 2016.]

[CLICK HERE to read the article, “Personal Investment Strategies for Volatile Times,” from Knowledge@Wharton, Feb. 16, 2016.]

Market volatility frequently drives investors into more “safe-haven” financial products, such as CDs and cash. However, your safe haven today won’t necessarily be a safe haven when you retire. Small returns and low yields that do not keep up with the cost of living can put your retirement income in a challenging position.

The reality is that we as individuals can’t control the markets. When large numbers of investors all commit the same actions -- such as invest in a certain company and drive up its price, or sell and drop it precipitously -- we can influence the price of individual stocks. But there are far greater and overarching economic forces that impact market performance, such as oil production and the direction of interest rates.

All we can really do is control our own actions -- and, as Bogle suggests, take our emotions out of the picture and rely on a retirement strategy designed to meet our personal goals. That’s exactly what we’re here to help you do.

[CLICK HERE to read the article, “Investment Insights: No Relief,” from Merrill Lynch, Jan. 9, 2016.]

[CLICK HERE to read the article, “Vanguard CEO: Expect a lot less from stocks for a decade,” from CNBC, Jan. 25, 2016.]

 

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to steady and reliable income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives.

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