Six things to help clients weather a market downturn

Practice Management

Six things to help clients weather a market downturn

Here are six investing basics to keep in mind during volatile times.

It’s natural for clients to be nervous when the markets head for negative territory. Help them keep a positive perspective with these six investing reminders.

It can be unsettling for investors when their portfolios and the markets start heading into the red. Here are six investing basics to keep in mind during volatile times.

  1. Periods of volatility are normal - All markets move in cycles, and periods of steep contraction are completely normal. While the length of market contractions varies, periods of growth and expansion are usually waiting on the other side. Since 1973, stocks have fallen more than 10 percent and subsequently rebounded eight times. 
  2. Don’t panic - Letting emotions dictate the investing strategy is a risk they shouldn’t take. Short-term decisions can have long-term consequences on the portfolio. Being patient can pay dividends.
  3. Know your portfolio – Help them understand their investments and how specific assets represent different goals and outcomes. Keep in mind their risk tolerance and investment timeline, and if either has changed, consider discussing rebalancing your clients’ portfolio. Diversification can potentially help balance risk during a downturn and mitigate extreme swings in value.
  4. Stay the course – Clients should remember their financial plan and long-term goals and stick to them. A disciplined investment approach is the best strategy for handling market downturns and will likely enable them to participate when the markets rebound.
  5. Consider opportunities - Determine whether periods of volatility are a good time to take advantage of investment opportunities in line with your clients’ long-term plan.
  6. You’re not alone – As your clients’ financial advisor you are available to help clients when they need it. You can guide clients through difficult markets and be the independent voice that helps them stay focused on their long-term goals. 

Investing involves risk and investors may incur a profit or a loss. Past performance may not be indicative of future results. Diversification does not ensure a profit or protect against a loss.

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