Keys to Weathering Market Volatility
The recent turbulence in the stock market may be
causing concern among novice investors, but
experienced investors understand that what we
have seen so far this year is not earth shattering.
For context, investors who lived through events
like the Black Monday crash of 1987, the Dot-
com bust in 2001, the global financial crisis of
2008, and the COVID-19 market downturn, have
gained valuable experience and a deeper
understanding
of
equity
market
swings.
Unfortunately, investors with limited experience
may lack the perspective or the wisdom of those
who have navigated the investment world for a
longer period. Knowledge can help provide a
general understanding of a topic and expertise
can offer a higher level of skill and proficiency.
In the competitive media industry, outlets often
focus on sensational headlines to capture
attention, sometimes amplifying investor anxiety
in the process. During these confusing times, it is
helpful to remember that volatility is a part of the
investment experience, therefore, it is beneficial
to understand or remind yourself how to embrace
and manage times of investment turbulence.
Volatility in equities, in simple terms, means
price swings. The degree of variation of prices
and the time period over which they occur
determines the severity of the volatility. High
volatility results in significant and rapid price
changes, while low volatility leads to more stable
and smaller price fluctuations. Typically, high
volatility arises during uncertain times, such as
the recent tariff proposals or the pandemic-driven
crisis.
Strategy
One of the best ways to prepare for volatility is
to understand your objectives and strategy. We
believe that a long-term investment strategy is
integral to successful financial planning. Focus
on your long-term investment goals rather than
reacting to short-term market movements.
Historically, over longer periods of time, equity
markets have recovered from downturns.
What NOT to Do!
Seasoned investors understand that volatility is a
natural part of the investing journey and that
We believe that an educated client is the best client. We want our clients to understand how
volatility works, so they can better evaluate how to react to any daily movements in the stock
market. Our primary goal as your wealth manager is to assist you on your financial journey,
which includes helping you effectively manage volatility during uncertain times. If you have any
questions or concerns, please feel free to reach out to us. We would be happy to talk with you.
(252) 451-0488
www.StrategicFreedom.com
Anthony (Tony) Engrassia, ChFC, LUTCF, NSSA®
Certified Financial Fiduciary®
bumps in the road can and will occur. Those who
have
experienced
challenging
periods
of
volatility in their investing journey know that
there are a handful of strategies that can make
these times more manageable, as well as pitfalls
that can complicate the situation.
While most investors recognize the importance
of time horizons and risk tolerance, they
sometimes overlook a crucial factor: human
emotion. Even the most experienced investors
can be tempted to stray from their long-term
plans and become caught up in the short-term
fluctuations of the economic environment.
Allowing panic and doubt to influence decision-
making, and worrying about aspects beyond
one's control, can lead to rash and poorly
considered choices. You are the best evaluator of
how you react to potentially stressful situations.
If you would like to discuss your financial
concerns with us, we would embrace the
opportunity to speak with you.
It can be very tempting to take money out of
equities with the intention of reinvesting, “when
the time is right.” However, attempting to time
the market should not be a primary strategy. It is
nearly impossible to determine when the perfect
time is to get in and out of the market. Trying to
time the market can prove to be highly risky, and
many investors have missed out on significant
gains by doing so.
Minimizing your exposure to the media during
volatile times can prove to be healthy.
Consuming excessive media during uncertain
times can increase stress and anxiety. Media
coverage can often exaggerate the situation,
making it sound worse than it truly is. While you
cannot control what the media is dishing out, you
can control how much you intake and how you
react to the information. Remember the saying,
“perception is reality,” because the media has
done a good job at skewing and sensationalizing
facts and many times their main goal is to
increase viewership. Refraining from too much
media can help you stay calm during times of
uncertainty. Ignoring the talking heads and
staying focused on your long-term goals is
typically the most productive path.
Seasoned investors know that trying to navigate
investment decisions without consulting their
financial professional can pose an unnecessary
obstacle to achieving their financial goals.
Common Pitfalls
During Market Volatility
• Being more concerned about short-term
fluctuations than your long-term goals.
• Allowing panic and doubt to control your
actions and worrying about things you
cannot control.
• Trying to time the market.
• Letting the media dictate how you
perceive volatility.
• Not collaborating with a financial
professional.
Positive Actions Investors Can
Take During Market Volatility
• Understand and focus on your personal
financial goals.
• Have a long-term strategy.
• Think big picture, not day-to-day.
• Limit constantly checking your
investments.
• Avoid overexposure to the media.
• Talk with us about your concerns.
Seeking guidance during confusing
times can help investors find the best
path to success with their hard-earned
money.
Positive Actions
Maintaining focus on your personal
financial goals should be your main
priority. We strive to craft a diversified,
long-term financial plan with clients
that takes into consideration their time
horizon and risk tolerance. We also try to help
clients stay on track and avoid allowing
temporary fluctuations in the markets to diverge
them from their long-term path. While this may
sound easier said than done, practicing patience
can help you become more resilient to volatility.
Constantly checking your investments, like every
hour or even daily, can increase your anxiety.
Please remember that investing for the long-term
is never a straight line, and being consumed by
the daily ups and downs can lead to increased
concern. A well-diversified portfolio can include
stocks that can weather short-term volatility and
still allow the potential for long-term gains.
As the great investor Warren Buffet said, “If you
are not willing to own a stock for 10 years, don’t
even think about owning it for 10 minutes.”
Sometimes, the big picture can get lost when the
weeds start to become the focus. If you would
like to discuss your financial plan and review
it to confirm it still conforms to your goals,
please contact us and we would be happy to
explore this with you.
Opportunities During
Market Downturns
Navigating turbulent times in financial markets
can be difficult. They say if life gives you
lemons, make lemonade – and there is a silver
lining for investors and savers during market
downturns.
Here are a few ways you could enhance your
personal situation when equities take a dip. Our
goal is to help you make sound financial
decisions.
• Add new money into your retirement or
brokerage account. If you are in a financial
situation that could allow you to make new
investments, buying stocks during a market
downturn can be a great way to potentially
increase your long-term returns.
• Rebalance your portfolio. When stock
prices drop, they will account for less of your
diversified portfolio if your investments in
bonds have maintained their value or didn’t
drop as much. Moving your portfolio
allocations back to your desired amounts, or
even increasing your allocation to stocks, can
help set you up for potentially strong returns
after the downturn passes.
Our goal is to help you make sound financial
decisions. As always, please call us if you are
interested in making any changes to your
portfolio.
We Will Help You Stay
Properly Informed
We are closely monitoring areas that may impact
your financial situation. If you would like to
review your financial holdings, rebalance your
portfolio, or discuss any concerns or questions,
please know that we are here to assist you.
We believe that an informed client is the best
client. We will keep you updated on issues that
may affect your financial situation. Additionally,
please keep us informed of any changes in your
circumstances, such as health issues, shifts in
your retirement goals, or the sale of a home. The
more we know about your unique situation, the
better we can advise you.
A skilled financial professional can help
simplify your journey toward achieving your
goals. By understanding your needs and
objectives, we can create a plan tailored to
your situation. As always, we appreciate the
opportunity to assist you with all your
financial needs.
Scan or Click the QR Code to Schedule
Your Complimentary Starter Session™ Today!
Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC registered investment advisor. Registration as an investment advisor does not imply a certain level of skill of training. Wealth
Management Strategies and PCA are separate, non-affiliated entities. PCA does not provide tax or legal advice.
Tax Planning During Market Volatility
Navigating market volatility can be frustrating. The good news is that investors could
possibly take advantage of potential strategic tax planning opportunities during these times.
• Roth IRA Conversions – While this is a complex strategy that you should discuss with a financial
professional before implementing, converting to a Roth IRA during a market downturn can potentially
maximize tax-free growth in the future. By converting when the value of your traditional IRA is lower due
to a market downturn, you will pay taxes on a smaller amount, and any subsequent market recovery
will be tax-free within the Roth IRA.
• Tax Loss Harvesting – Downturns can provide opportunities to “harvest” capital losses. Investments
that are valued below their cost basis can be sold and the losses taken can be used to offset capital
gains. If losses exceed gains for the calendar year, up to $3,000 may be used to offset ordinary income,
and unused balances can be carried forward to future years. Please note that you should talk with us
or a tax professional about doing this because rules like you must wait 30 days to repurchase the
security to avoid a “wash sale” need to be followed.
• Gifting to Family Members at Reduced Prices - When equity prices are down, you can gift securities
at lower values using less of your annual or lifetime gift tax exemption. Like the other items on this list,
we recommend you coordinate these with us or a qualified professional to fully understand the rules
and effects, but this strategy can prove to be effective during market downfalls.
Complimentary Starter Session™
One of our goals this year is to help more people with their financial decisions.
If you are not a client of Wealth Management Strategies, we would like to offer you a
complimentary, Starter Session™ at absolutely no cost or obligation.
Please call 252-451-0488 for more information or to schedule your Starter Session™!