By Frank Legan
It certainly seems like we are in a period of a great reset. The invasion of Ukraine is changing the geopolitical landscape, rising inflation, and a Fed that’s really behind the curve is increasing interest rates. Our world economy is dealing with a lot, and the capital markets are demonstrating that they’re very frustrated by this uncertainty.
Through last week (6/17/22), all three indices have experienced significant declines YTD: the S&P 500 has fallen 23%, the Nasdaq fell 32%, and the Dow fell 18%. (1) Even the seemingly immune big tech giants are taking a hit, with Apple and Amazon falling 26% and 35% YTD, respectively. (2) While there are many causes we can point to as the source of this volatility, that doesn’t change the fact that we have no control over what the markets decide to do.
We’re here to help you take a deep breath and guide you through market fluctuations. Here’s how we watch over your finances and stay proactive in our plan to safeguard your wealth.
Big-Picture Planning
We don’t make investment decisions based on what everyone else is doing or what’s popular in the investment industry. Whenever we make planning decisions with you and offer investment recommendations, we do it with your goals and risk tolerance at the forefront. When the markets get shaky, we go the extra step of reviewing your objectives with you to make sure you’re still on track and make educated decisions that are not based on panic or emotion.
This starts from the very beginning of our relationship with you. We use conservative return numbers when analyzing the potential outcomes of your plan because we know that corrections and bear markets will come. We also use asset allocation “buckets” that divide your wealth into short, intermediate, and long-term strategies to help you make the most of a volatile market.
And in times like this, it’s even more important to have an emergency fund or a percentage of your portfolio that is either in cash or liquid enough if you need it for unexpected circumstances. While cash investments may not provide a lot of growth, having a cash contingency fund with at least one year’s worth of living expenses will protect you against having to sell investments at low values to free up cash.
We Know Your Risk Tolerance
Do you know that feeling in the pit of your stomach when you make a decision that was too risky for your comfort? Our goal is to help you avoid that feeling when it comes to your investments. Before investing any of your money, we determine your risk tolerance, the amount of risk that an investor is comfortable taking or the degree of uncertainty that an investor can handle. Like most things in life, your risk tolerance may change with age, income, and financial goals. We don’t want you to lose sleep at night, so we review your risk tolerance and how much risk you can afford to take and adjust your investments over time.
We also watch over your money like a hawk, and when it’s time to get out of an investment because the risk is rising, we will contact you about adjusting your allocation.
Timing Matters
During bear markets, it’s important to remember that investors only realize losses when they sell, so it’s critical not to sell when the market is down. When you need to access your money is an important factor in avoiding those losses. For example, if you are a decade or more away from retirement, you can likely wait out a recession or correction and benefit from the recovery. If you need access to your funds in the next several years or are within your first several years of retirement (frequently known as the “fragile decade”), (3) a recession will make more of an impact on your money and your plans.
From a practical perspective, we make sure your portfolio’s allocation is set up with your time horizon in mind. If you need money in the short term, your portfolio will hold safe investments like cash or short-term bonds. Because retirement can last decades, you still want some of your money in investments that will produce long-term growth, but your portfolio will look very different from that of a 40-year-old in the peak of their working years.
We Are Your Emotional Support System
One of the most important rules in investing is to refrain from making emotional decisions. Nervous emotion is a great destroyer of wealth. It’s easy to get swept away emotionally when the market is in negative territory. But if you stay true to your investment strategy and avoid making decisions when emotions are running high, you won’t run the risk of losing even more.
Remember, bear markets have happened before and they will happen again. As long as you have created a disciplined financial plan and have a trusted advisor monitoring your money, you are doing your part. If you don’t have someone you can turn to when the market gets wild, we’d love to support you and help you build your finances for a strong future. Reach out to us at 440-683-9213 or flegan@cedarbrookfinancial.com or schedule a complimentary introductory call online!
About Frank
Frank Legan is Partner, Financial Advisor, and member of the Forward Look Committee at Cedar Brook Group, one of the largest independent wealth management firms in Northeast Ohio. Frank spends his days designing and implementing personalized financial planning strategies for corporate executives, closely held business owners, artists, families, and retirees. He specializes in lifetime income strategies, investment advice, and estate planning services. He also works with businesses to develop strategic and succession planning strategies. Frank has a Bachelor of Arts in Political Science from the University of Dayton, as well as a Master of Public Administration focused on municipal management from Cleveland State University. Prior to joining Cedar Brook Group, Frank was a financial advisor in the private client group at Merrill Lynch and with NatCity/PNC Investments. Frank is active in his community, serving on various councils, boards, and committees. Frank serves as Chairman of the Board of Directors for Catholic Charities Diocese of Cleveland, and is a board member of the Catholic Community Foundation. When he’s not working, you can find Frank spending time with his wife, Laura, their daughter, Reese, and their beloved collie, Charlie. Frank and his family are volunteers at St. Francis of Assisi church in Gates Mills. To learn more about Frank, connect with him on LinkedIn.
Securities offered through Cadaret, Grant & Co., Inc., an SEC Registered Investment Advisor and member FINRA/SIPC. Advisory services offered through Cadaret, Grant & Co., Inc. and Cedar Brook Group, an SEC Registered Investment Advisor. Cadaret, Grant & Co. and Cedar Brook are separate entities. Please remember that securities cannot be purchased, sold or traded via e-mail or voice message system. Please contact our office at 440.683.9213 should you need assistance in placing a trade. This email transmission and any documents, files or previous email messages attached to it may contain information that is confidential or legally privileged. If you are not the intended recipient, you are hereby notified that you must not read this transmission and that any disclosure, copying, printing, distribution, or any action or omission of this transmission is strictly prohibited. If you have received this transmission in error, please immediately notify the sender by telephone at 440.683.9213 or return and delete the original transmission and its attachments without reading or saving in any manner.
The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Neither Cadaret Grant & Co, Inc. nor its registered representatives or employees, provide tax or legal services. Please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice.
______________
(1) https://www.google.com/finance/?hl=en
(2) https://money.com/why-are-tech-stocks-down-2022/
(3) https://www.lifehealth.com/navigating-retirements-fragile-decade/
