Apr 22, 2020

How to Weather the Storm of Market Declines & Uncertainty

Our best advice to help most investors weather this economic storm of uncertainty amid COVID-19 (coronavirus)-related market declines is similar to what we’re hearing to protect ourselves from the virus: Stay where you are.

“Similar to taking a road trip, a detour is no reason to change our final destination,” notes Greg Sweeney, Bell Bank chief investment officer. “The same thing applies here. We have to remember to focus on the final investment goal.”

Greg, who also chairs Bell’s investment committee and has been named several times to Nelson’s/Thompson’s World’s Best Money Managers list, has been through many periods of market change.

Sometimes periods of market calm extend for so long that volatility becomes a distant memory,” Greg remarks. “Last year was one of those periods. When volatility suddenly presents itself like it has now, it creates fear, and fear clouds investors’ confidence, because our innate response is usually to flee from what threatens us.”

A big way we work to support our clients at Bell Bank Wealth Management is by helping them though market conditions like these. 

Change Is the Only Constant

On average, the market sells off 5% 3 times a year, 10% every 18 months and 20% every 3 years, Greg explains. The market sold off nearly 50% after the tech stock bubble and more than 50% during the financial crisis in 2008 and 2009. 

Following each of these events, it took more than a year to move through the selloff. While this current stock market decline of 30% through March 23 (and subsequent 10% rebound over the next 2 days) took only 4 weeks, that does not change the process of moving through it.

“The risk of selling investments that support your long-term investment goals is being on the sidelines and missing out on the recovery when it starts,” Greg comments.

In times like these, it’s important to remember:

  1. The asset allocation parameters we helped you establish, which reflect your profile and long-term goals, are very important.
  2. When we implement investment plans, we believe the investment strategy with the fewest unknown variables has the highest probability of success.
  3. Remain focused on the long term, remember the power of diversification, remain aware of risk, and stay diligent about letting compounding accrue to your portfolio’s benefit.

What To Do If You’re In or Near Retirement

While it’s hard for any investor to see a portfolio decline in value, it’s even more difficult for investors who are in or near retirement. However, Greg notes that even in retirement, proper planning will go a long way toward helping you move through this type of event. 

For example:

  • A retirement portfolio often calls for having 6 to 12 months of living expenses in savings, money market investments or CDs to guard against having to tap a portfolio for cash at a time of market stress.
  • In retirement years, investors often have 50% to 70% of their investment portfolios in bonds, which are much less volatile than stocks.
  • Other strategies, such as income-generating allocations, can help portfolios better move through volatility.

Note: If market conditions like these have you reconsidering your portfolio allocations, except for some tax management strategies, it is usually best to wait for calmer market conditions to make changes.

How Bell Bank Wealth Management Continues to Serve You

We’re taking every measure possible to protect the health of our customers, employees and community, while making sure we’re available to help you. As we pull together as a community to get through this difficult time, we remain committed to helping you with all of your finances. While we are relying more heavily on technology to stay connected right now, we are still working to ensure you receive the high level of personalized service you expect from Bell.

“Our mission of ‘Happy Employees! Happy Customers!’ is what truly defines us at Bell Bank, and we continue to focus on that goal as we navigate this COVID-19 crisis,” remarks Craig Samuelson, Bell’s wealth management chief operating officer. “Our employees are our most valuable resource. They pride themselves on being the best at what they do for our clients. That hasn’t changed in this new environment. Even working from home, separated from our teammates and clients, we continue to prioritize our clients, put their best interests first, and provide the unequaled service we’re known for.”

At Bell, our teams use a “playbook” to define our purpose, vision, values, and strategy for how we do business. At the top of the list of how we carry out our mission and realize our vision is “people matter.”

“Never has that been more important than today in these unprecedented times,” affirms Patrick Chaffee, Bell’s executive vice-president of banking, wealth management and insurance. “Our top priority is the safety of our employees and clients. Our second priority in carrying out our mission and realizing our vision is to think long term. This strategy not only directs our company’s decision making, but also how we guide our clients in their financial decisions. The financial market’s current volatility and uncertainty makes this more important than ever. Together, we will weather this storm.”

 

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