By Paul Bullock
Is the state of the world and the roller coaster stock market making your head spin? Does it feel like you’re constantly waiting for the other shoe to drop? It’s no secret that things are a bit uncertain these days. If you’re like most people, living with this level of uncertainty can be stressful. But, as much as we may not like living with instability, the market likes it even less.
For example, stocks have been plummeting lately, which is not helped by investors purging stocks out of recession fears. As of June 1, stocks rose slightly with the S&P 500 gaining 1.8%, breaking a two-day losing streak. (1) The overall outlook, however, is that there is a downward trend. As of mid-May, the S&P 500 was down nearly 20% from January’s high, briefly dipping into bear market territory. (2) Even the big guns were not immune to a drop; among others, Amazon and Apple posting declines. (3,4) As a result, many economic leaders are predicting a recession in our near future. (5) There are many factors we can point to as the cause of all this unpredictability—rampant inflation, the Fed’s solution of increasing interest rates, and international unrest—but the fact remains that we have no control over any of that.
At Wellington Investment Advisors, we’re here to help you worry less by walking you through whatever happens. Here’s how we are watching over your finances and taking proactive steps to help secure 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 in mind. When the markets get shaky, we go the extra step of reviewing your objectives 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 happen. 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 important to have an emergency fund or a percentage of your portfolio that is either in cash or liquid enough should you need to access the funds. 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 help 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, 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 five years or are within your first five years of retirement (frequently known as the “fragile decade”), 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 his or her working years.
We Are Your Emotional Support System
When investing, it’s important to avoid making emotional decisions. Of course, this is easier said than done. It’s easy to get carried away as you watch stocks rise and fall, but you’ll avoid the risk of losing even more if you stay true to your investment strategy and avoid making decisions when emotions are running high.
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 who is monitoring your money, you are doing your part to prepare.
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. Schedule a no-obligation introductory meeting or reach out to me at paul@wellingtoninvestmentadvisors.com or (812) 333-0874 to get started. Be sure to check out what some of our clients say about working with our team at Wellington Investment Advisors to learn more about how we can help you.
About Paul
Paul Bullock is CEO of Wellington Investment Advisors, an independent, boutique fiduciary firm serving pre-retirees and university faculty across Indiana. With over 32 years of financial experience, Paul is committed to building long-term relationships through thoughtful, personalized investment advice and guidance. He focuses on a disciplined tactical asset allocation approach to money management through a strong understanding of economic and market conditions and strives to build trust with clients by providing sound guidance. Paul understands the hard work his clients have put in to arrive at where they are today and wants to see them succeed in their goals for the future. Paul graduated from the University of Texas with an MBA, as well as a bachelor’s degree in finance, and has been dedicated to assisting clients with their financial needs ever since. When he is not working, Paul enjoys time with his family and is also an avid equestrian polo player who helps raise money for over 18 different charities through his playing. To learn more about Paul, connect with him on LinkedIn.
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(3) https://www.cnbc.com/2022/05/23/stock-market-futures-open-to-close-news.html
(4) https://www.cnbc.com/2022/05/24/5-things-to-know-before-the-stock-market-opens-tuesday-may-24.html