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The 4-Step Action Plan if You’re Worried About Your Investment Portfolio

Posted by Gabriel Burczyk | CEO
May 31, 2017

the-volitile-stock-market-action-plan.pngIt is an interesting time in the United States’ sociopolitical sphere, to say the least. But lucky for you, this article isn’t about politics, a social movement, or anything in the news for that matter. It is about what to do if you start to get worried about how the equities and/or bond markets may react to ongoing developments and potential controversies. 

In the current environment, it is the uncertainty that has many investors on edge. For some, every day may feel like it has the potential for some breaking story that sinks markets. To help address any concern investors may have, we present a 4-step action plan for what to do when you’re worried about your investment portfolio. 

1. Remember that Emotional Decision-Making is Generally Not an Investor’s Friend – in a recent article we quoted Warren Buffet with regards to investing in the stock market. He said, “it’s an easy game if you control your emotions” (we also pointed out, importantly, that investing is not a game). But Buffet has a valid point here – emotions often get in the way of investors making decisions based on market, economic, and corporate fundamentals. Emotion may also fly in the face of an investor’s long-term strategy and goals – neither of which an investor should be quick to compromise. If you start to get worried, take a moment to remember that making an emotional investment decision may not be in your best interest.

Action plan for when you're worried about your investments

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2. Remember that Volatility is Common, and Fairly Normal – volatility in the markets is often the thing that causes investors to worry in the first place. But when volatility starts to set-in, investors should remember that volatility is a normal, natural feature of equity investing. It’s been around as long as investing in stocks has, and in many cases it is just a ‘temporary’ setback – what professionals refer to as a “market correction.” As this graphic from J.P. Morgan illustrates clearly, volatility is a regular occurrence. The S&P 500 experiences average intra-year declines of 14.1%, yet in the last 37 years it has finished positive in 28 of them.

3. Remember that the Markets are Also Driven by Economic Fundamentals – if an investor looks at corporate earnings and GDP growth as two core measures for strength in economic fundamentals, then that should help ease worries – at least a little bit. According to Dr. David Kelly, the Chief Global Strategist for J.P. Morgan, though U.S. GDP rose just 0.7% in the first quarter, data points “were suppressed by a big falloff in inventory investment and declining government spending.” Dr. Kelly expects these components of GDP, along with consumer spending, to post better numbers in Q2. Then there is corporate earnings, which some would argue is the main driver of stock prices over time. Looking at that measure, consensus estimates (as shown in the chart below) point to a firm earnings uptrend in the quarters ahead.

4. Review your Asset Allocation and Strategy with Your Financial Advisor – if you’re worried, maybe it would be a good idea to set a meeting with your financial advisor to review your long-term strategy and check to see if you are on-track to meet your goals. Sometimes it feels good to put your investment portfolio back on the table and have your advisor explain why your investments are set-up the way they are, and how your investment portfolio is designed to meet your needs and investment objectives. The hope here is that you get some reassurance that can put you at ease and restore your confidence in your strategy.


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If You Don’t Have a Financial Advisor, Ask WrapManager for Insight

If you don’t have a financial advisor and would like a ‘sounding board’ to discuss your concerns with your investment portfolio and/or the markets, just call a Wealth Manager for an open-ended discussion about what’s on your mind. Contacting us is free of charge, of course, and could be a learning experience for you. Feel free to reach out anytime at 1-800-541-7774 or send us an email if you prefer: wealth@wrapmanager.com.


The views contained herein are not to be taken as an advice or a recommendation to buy or sell any investment in any jurisdiction. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance.


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