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Tips to Handle a Market Decline

L Haelen 2016
Laurie Haelen, AIF®
Senior Vice President, Manager of Wealth Solutions
[email protected]
(585) 419-0670 x41970

Market declines are challenging times and it is important to realize that they are an inevitable part of the economic cycle. Here are some simple tips to consider when thinking about your portfolio.

1. Stay Calm - There is more information available, both true and false, than there ever has been before. The result can be that investor stress causes people to make bad decisions. We understand that you may be feeling anxious. In order to make decisions that are best for your own long-term financial situation, stay calm and make your decisions based upon facts and not emotions.

2. Focus on the long-term - Your investments are designed to support your long-term goals and therefore should not change unless your long-term objectives warrant it. According to Vanguard, the average annual return of a portfolio consisting of 60 percent stocks and 40 percent bonds for the period from 1926-2018 was 8.6 percent. The highest loss during that period was 26.6 percent in 1931. There were losses in 22 of the 93 years. Although the future may not be identical to the past, it has benefited investors to stick to their plan for the long-term, even when the current situation seems dire.

3. Review your Financial Plan - Have your circumstances changed? Are your goals different? If not, resist the urge to make drastic changes to your investment strategy. Remember that market volatility has already been anticipated and built into your plan. We have had an 11-year positive run in the stock market. It was inevitable that a major downturn would occur at some point. It was a matter of when, not if. 

With that said, declines in the market are a great time to revisit your long and short-term financial goals. Ensuring that you have an emergency fund, for example, is a goal that can help prevent from having to withdraw funds from the market at an inopportune time. Ensure your stock-to-bond asset allocation is appropriate and that your portfolio is adequately diversified to weather the storm. If you are retired and taking regular distributions from your portfolio to support your household cash flow needs, draw from the bond or cash portion of your portfolio, and give your stocks a chance to recover.

4. Take Advantage of Opportunities - Market declines present opportunities that investors may not be aware of with the daily media onslaught of negativity. When the markets are down, stocks are “on sale” and it is a great time to consider increasing contributions to your investments to take advantage of lower prices. For example, recent market activity has caused an average 60/40 portfolio to be down close to 20% year to date (as of March 20th). Adding funds now to long-term portfolios will aid in recovery once the market downturn reverses. Also, with low interest rates, it may be time to refinance some higher interest debt such as credit cards or auto loans

If you need help navigating this difficult time, CNB Wealth Management stands ready to be of assistance to you with any of your financial needs. Please feel free to reach out to us at any time and be kind to yourself during these uncertain times. #CNBeKind


This material is provided for general information purposes only. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust or its affiliates, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.