There’s no easy way to say it; the beginning of 2016 was a historically bad start to the year for the Dow Jones and the S&P 500. Even with some encouraging signs on Wall Street this week, it can be difficult to remain calm when markets are unstable.
With that in mind, we reached out to members of the local banking and investment community with the following question: What advice would you give our readers when it comes to managing their money in a volatile market?
Here are the responses we received:
Todd Pisarczyk, Sustainable Wealth Management
“The first two weeks of January were the worst start in history for the S&P 500 with the index down 7.93 percent. However, according to data provided by Standard and Poor’s Index Services group, a negative January was followed by a subsequent 11-month return that was positive 59 percent of the time with an average return of 7 percent. This data indicates that a negative January does not predict poor market returns for the rest of the year. Still, it’s important to remember that past performance is not a guarantee of future results.
We believe investors are better off to stay patient, have a long-term plan and investment strategy and stick to it even when markets get choppy. Legendary investor Warren Buffett once said, ‘The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.’ If Mr. Buffett’s words aren’t convincing enough, remember that at least in the stock market, patience really is a virtue.”
Dominique Merriweather, Pacific Continental Bank
“If I were to provide advice about money management to business owners in a volatile market, the first thing I would tell them is not to overreact. In the world we live in today, with a 24-hour news cycle (specifically in the spring of a contentious presidential election), the media hype can greatly exaggerate the stresses of the economy. Don’t do something rash regarding your business. Stick to the key fundamentals; cash is king, so ensure you have enough on hand to handle most emergencies, and prudently manage the growth of your business.”
Brett Bryant, Heritage Bank
“We are in extraordinary times with historically low interest rates. There was a time when you could get a respectable ‘risk-free’ return in a U.S. Treasury obligation or a Bank CD. Now these investments will earn around .5 of 1 percent. For those seeking returns in excess of inflation, many investors put principle ‘at risk’ in assets like real estate, common stocks and commodities. The valuation ‘downdrafts’ in these asset classes, like we have just experienced in stocks, can really test our ability to assume risk to reach for return. The historical data consistently confirms that investors should establish a clear asset allocation policy that outlines comfortable exposure to risk and non-risk asset classes. Establishing a regular time each year to rebalance this exposure to your planned targets, will make good use of the normal market cycles and allow consistency through what can appear like chaos.
In short, make a plan and stick to it, then let time take care of your returns.”
Mark Martel, Martel Wealth Advisors
“Here are five back-to-basics thoughts on small business owners dealing with volatility in the marketplace:
- First and foremost, develop a prudent investment policy statement
- Diversity, rebalance, always keep costs low
- Remember, only control what you can control
- Maintain discipline, manage expectations
- Be skeptical of expected returns beyond expected risks.”
Jeff Taylor, KeyBank
“We believe the current volatility is a reflection of concerns that should be transitory in nature (oil, China, currency headwinds, election etc.). We are in a slower growth environment, but our research teams believe the risk of a recession remains unlikely. Corrections without recessions tend to be short-lived, while corrections caused by a recession tend to be more severe and extended in time. Our research team continues to pay close attention to incoming data points and indicators that help keep us informed about the health of the economies and the companies we invest in. For now, we believe a recession (U.S. and global) remains unlikely. This makes the current market volatility, while uncomfortable, an advantageous time to invest excess cash and/or re-align portfolios.
Planning plays a large role in the way we manage our clients’ wealth and through careful planning, our clients’ investment portfolio are designed to weather the full market cycle.”