How to survive a stock market hemorrhage, according to financial advisors

Add to the global political and geopolitical tensions in the Middle East and low wages among technology companies and consumers and you have a pot boiling over, according to Paul Christopher, head of global strategy of finance at Wells Fargo Investment Institute, he explained in the letter. on Monday. Seemingly invincible technological devices are down; Japan saw its worst market day in decades after it raised its interest rate last week, and US markets saw their worst decline since 2022. In short, there’s a lot going on—perhaps too much for the frustrated consumer.

Monday brought broken records, as the CBOE Volatility Index (VIX), known as Wall Street’s “fear gauge”, hit a two-year high and Japan’s Nikkei 225 had a bad day the worst since 1987, down 12%. It’s definitely a Monday thing. But that doesn’t mean it’s time for investors to panic, explain financial advisors.

“Basically, what you’re seeing here is a lot of noise,” Douglas Boneparth, president of Bone Fide Wealth in New York City, said. Good luck.

Stand firm, don’t sell

“You don’t want to react, it can easily come back,” said Dan Casey, investment consultant and founder of Bridgeriver Advisors. Good luck of the current market downturn.

It’s natural to feel a little nervous during times of uncertainty. But that doesn’t mean we need to give in to our desire to go into the bank and get our tuppence back, which is Mary Poppins. In these moments, it’s a matter of taking a deep breath and stepping back.

“If you’re worried or focused on things that don’t affect you, are you using your energy and time wisely? “Probably not,” Boneparth said, cautioning investors to focus instead on what they can control such as the media they consume and how their investments align with goals. their finances.

Part of the problem with listening to concerns, whether they’re justified or not, is that it creates new problems, Casey said. He often tells his customers the following things: “When you sell [a downturn] like this, you create a temporary solution. But you create another problem, that is, when will I return? In other words, people who try to time the market—including selling after a stock goes down—often face the problem of buying back at a higher price. Casey sometimes tells the client to split the difference, keeping half of his money in the market while withdrawing the other half.

Casey often tells his clients that any dollar that goes into the stock market “better have a five-year window on it.” It’s just saying, you’re in it for the long haul, and getting out one day just “causes chaos,” and it could be world chaos if millions of investors fall prey to panicking at the same time.

Even when there is talk of recession worries, investors should remind themselves that the stock market is not an economy – and most consumers are showing no signs of panic. Spending is still good. Travel is still good…people are out and about,” Casey said. “There is nothing that I am looking at that indicates that the customer is going bankrupt. Everything is going well so far. “

Emotional headlines about the recession reminiscent of Black Monday don’t make Casey shy. “Maybe 20 years ago that would have shocked me,” he said, “but with computers and mass-marketing methods “you don’t see, sometimes, small corrections. “

Think about long-term goals

So what should we do, if we are not afraid? Think about the future.

Boneparth points out that the market usually has three pullbacks of 5% and one of 10% in any given year, which means that the current turmoil is not unusual. Taking a distance from the chaos can be useful, not only to understand the chaos of the normal economic conditions but also to get a complete view of what you want as a buyer and investor.

“If you don’t have a plan, now is a good time to think about doing so, either on your own or with a financial advisor,” Boneparth adds, explaining that times like these underscore the importance of doing so. . have a long-term financial plan. He notes that those who already have strong cash reserves and a strategy “will not be too shaken by a series of negative headlines here,” as these safety nets can be a comfort in times when full of salt in the knees. In addition, because sales make stocks cheaper, he noted that investors with regular contributions, such as a 401(k), will benefit from a decline in the dollar-denominated market.

Ups and downs are unfortunately part of the game when it comes to the stock market. As Boneparth notes, recessions happen, and people who don’t consider recessions when making long-term investments are “probably making a mistake.”

That’s why many financial advisors recommend investing in the long-term market—that is, any money you might need to rely on in the next few years (in say, an emergency fund or a down payment on a house you’re about to make an offer on) should be in some type of account, such as a CD, high-yield savings account or bonds Treasury.

So what does the strategy look like? Lavina Nagar, president of wealth management firm Maya Advisors, offers one example.

“While we cannot control market cycles, we can control how they affect our lives. This is why we keep enough buffers to help us get the lows,” he said. “When we work, we save 6-12 months of emergency money to support us in case of job loss. When we retire, we save enough money, so we don’t rely on our portfolios until markets recover.

“When the markets are emerging, stop and think – do I need money from my portfolio now? If the answer is no, remove the uncertainty. ”

Accountability for short-term mistakes and long-term goals is important, according to Casey. “Every kind of bucket of money you have needs to have a goal, and for a bucket of money in the stock market, the goal is long-term growth,” he said. “So stop freaking out and just sit down.”

Maybe, get involved

If you feel like rolling the dice now might be an incredibly good time to do so, if you take the advisors’ word for it.

“The bottom line, as Warren Buffet says, be greedy when others are fearful. So if many are selling, maybe it’s time for you to buy,” said Greg Giardino, VP Financial Advisor at Wealth Enhancement Group. He adds that, in terms of buying and selling, be careful. “If there were stocks you wanted to buy, if the factors don’t change, they’re cheap right now… If you wanted to buy $10,000, buy $5,000 and you wait a day or so, maybe buy some more.”

With stocks so low, those willing to be optimistic can strike while the iron is still there – it’s not hot, but it works. Boneparth talks about this moment as an opportunity for others to find cheap stocks if this is just a market correction. Say, if a long-term investor is looking at a big 10% decline in the index, “You can see some declines happening, and you can be in a position to take advantage of that,” he says.