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. Investments and insurance products are not FDIC insured, not bank deposits, not obligations of, or guaranteed by Canandaigua National Bank & Trust or any of its affiliates. Investments are subject to investment risks, including possible loss of principal amount invested. Past performance is not indicative of future investment results. Before making any investment decision, please consult your legal, tax or financial advisor. Investments and services may be offered through affiliate companies.