Financial Storm Watch or Warning? How to Weather the Storm….
We all know that dreaded radar sound that comes on the radio or disrupts our favorite TV show, “The National Weather Center has issued a severe storm watch/warning for the following counties….” Depending on if it is a watch or a warning, we’ll decide to either continue watching our show or prepare for the worst.
Late last year, we experienced a storm in the market. The market kept dropping and many investors found themselves wanting to prepare for the worst. This storm prompted many questions: What do we do? Should we get out? Should we buy more? The detriment of the bull market we have experienced in recent years is that it makes experiencing the stormy market weather even more unbearable. No one wants to experience what happened in 2008. When signs hint to a potential market threat, emotions take over and can cause even the most rational people to make irrational financial decisions. Having a fiduciary advisor on your side during these unbearable times can really help calm your emotions during an intense storm.
So, what’s the difference between a market storm watch and a market storm warning? What factors are we looking at? On any given day you can look at the radar and see some storms brewing somewhere in the country. That’s our typical market volatility. Market volatility is present in some capacity on a daily basis. Our storm ‘watches’ are what we would consider market corrections. Now these watches do not typically turn into warnings, as corrections are often considered healthy, allowing assets that may not be priced right to correct themselves and presenting a buying opportunity for long term investors.
A market warning, however, means that the watch has materialized, and we are getting ready to enter a bear market. Thankfully, this doesn’t happen very often. In fact, Morningstar returns from 1926 through March 29, 2019 show that the average bull market lasts 6.5 years on average while a bear market only lasts for a little over a year. Regardless, bear markets can be a very stressful and challenging time for investors. That’s why it’s important to have a severe storm plan. If you build the watches and the warnings into your plan, you will feel considerably more prepared when it occurs. That doesn’t mean it won’t be scary, but you have a plan that will guide you through the tough times and allow you to stay on track to achieving your financial goals.
Helping you be ‘weather prepared’ is what our fiduciary investment advisors are here to do. We take into account your financial goals as well as your financial fears and develop a goals-based approach to help you weather the storm and come out on top.
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