How Do I Protect Myself in a Market Downturn?

There are actionable tasks you can do while you navigate the markets’ unpredictable behavior. Market variations happen every day, but serious point swings can have significant psychological effects, that may sway judgement. While an immediate fluctuation in the market will reflect when you log into your computer to “check the balance”, the ability to remain calm, review your allocations, risk profile and immediate needs, lends to sound judgement and decision making. Let’s talk about a couple of daily practices that you will benefit from.

1. Manage Your Debt

We all have some kind of debt, but how you manage it will be very helpful when the markets show volatility. Consider paying down your debt. Lowering monthly debt is helpful in reducing financial stress. Keep credit card balances low. What subscriptions are you paying for but not using? Maybe eat out less. Could you pay off a vehicle? Have you shopped insurance to find if there are better rates? Debt is an area we see addressed first, if not on a regular basis. Just. In. Case.

2. Portfolio Diversification

Risk tolerance. Risk is spread out over asset classes. Asset classes are cash, bonds, money markets, stocks, real estate, life insurance, annuities, etc. Should a market downturn happen, your risk and exposure to it is spread out, therefore minimizing its effects. Keeping a bit of cash on the side also allows you to take advantage of any “sale” that may bubble up. Perhaps that very expensive stock you’ve been wanting to own just went down significantly. Should you buy it now? Let’s discuss if it is a good fit and good timing.

3. Do Not Overreact

Overreacting to the latest headline or rumor does not allow for clear and structured analyzation to understand what is really moving markets. Many questions need to be asked and discussed with a season professional. Often, this is a huge opportunity to utilize cash sitting on your sideline and acquiring investments at a lower price. Great time to share a conversation to see if there are opportunities that you should take advantage of, and if they fit your plan! Another approach is letting the professionals who manage your portfolio find those opportunities for you and put them to work.

4. Work with a reputable advisor

Understanding your specific needs, wants, goals and personality are so important. This is never “one size fits all”. You also can’t take simple division on the back of a napkin and expect to capture all the nuances that go into the financial plan of a family; be it one person or many. Take into consideration the amount of time it took to build your wealth. What goals are realistic? What needs are mandatory? What is my tax situation? Is tax-loss harvesting an opportunity for me? Market downturns will fluster some, yet not affect others. Volatility can evoke strong emotions. A diversified plan with guidelines in place assist in keeping your financial journey on track.

Work with solid, reputable and tenured professionals, like Wilmarth Private Wealth Management of Raymond James, who have been through this type of volatility before.

FAQs

How Do I Protect Myself in a Market Downturn?

Keep debt at a minimum, diversify holdings to ensure your nest eggs are not all in one basket. Work with a tenured, credentialed and fiduciary financial planner, and stay calm. Making major decisions during chaos usually isn’t productive.

What is Diversification?

Diversification of assets such as stocks, cash, insurance, bonds, annuities, and more… Your advisor will know how to structure a financial plan that will help you reach your goals. Your diversification will be unique to your needs.

What is Risk Tolerance?

Risk tolerance is the personal comfort level in losing any amount of money in the market due to its fluctuations. Risk is a factor when expecting a return on investment. To have return on investment, risk is involved. The length of time to continue to build your wealth and enjoy your nest egg is also taken into consideration. Are you in the beginning of your career or planning your next chapters, be it retirement or a new business?

How Do I Find a Reputable Financial Advisor?

A tool used to find the information and history of any financial planning professional in the continental US is BrokerCheck.finra.org. Put in the requested information: name, firm, city and state. The report shares the advisor’s history to include all the firms they have worked for, and if there are any disclosures, then call Wilmarth Private Wealth Management of Raymond James: 321-253-7911

Any opinions are those of Steven T. Wilmarth, CEP® and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Prior to making an investment decision, please consult with your financial advisor about your individual situation.