It’s hard to turn on the news these days and not feel uncertain about where the economy is headed.
Investors have been dumping stocks out of recession fears. In June, headline inflation rose to a whopping 9.1%. (1) The first half of 2022 saw a nearly 21% decline in the S&P. (2) With increases in the cost of goods and losses in the market running rampant, many economic leaders are predicting a recession in our near future. Yet, one factor remains constant: We have no control over any of this.
But, we at Key Wealth Management are here to help you hit the pause button and not the panic button. We will walk with you through whatever our markets decide to do. Here’s how we are watching over your finances and taking proactive steps to help secure your wealth:
Focus on Big-Picture Planning
We don’t make investment decisions based on what everyone else is doing or what’s popular in the 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 come. 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.
In times like this, it’s even more important to have an emergency fund or a percentage of your portfolio that is either in cash or liquid enough if you need it for unexpected circumstances. 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 protect you against having to sell investments at low values to free up cash.
We Understand 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.
Beyond Basic Diversification
We’ve all heard about the importance of diversification when it comes to maximizing our investments. But diversification should involve more than maintaining a balance between stocks and bonds, especially when traditional investments are volatile.
There are many alternative investments, but some of the most common include cryptocurrency, real estate, private real estate investment trusts (REITs), private equity, hedge funds, and precious metals (either directly or as an underlying asset in an exchange-traded fund). In general, the point of an alternative investment is that it behaves differently than stocks and bonds, which adds value to your portfolio by acting as a diversifier. We can help you add alternative investments to your portfolio, spreading out your risk even further.
Timing Does Matter
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”), (3) 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
Remember, it’s easy to panic during uncertain economic times. We are here to help you refrain from making emotional decisions. If you stay true to your investment strategy and avoid making decisions when emotions are running high, you won’t run the risk of losing even more.
This is not the first bear market. They have happened before and they will happen again. As long as you have created a disciplined financial plan and have a trusted advisor 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 an introductory appointment by reaching out to us at email@example.com or (724) 934-9196.
Todd Stepke is the founder and a financial advisor at Key Wealth Management, an independent financial firm committed to putting its clients first and building long-lasting relationships that carry them through life’s ups and downs. With over 25 years of experience in the financial industry, Todd provides his pre-retiree and retiree clients with customized solutions and a personal touch—getting to know their goals, needs, concerns, and life situations to build plans that help them pursue their ideal futures. Todd is known for going the extra mile and educating his clients, simplifying the complicated so they can make empowered and informed decisions.
Todd obtained a bachelor’s degree in accounting from Duquesne University. Spending many years as an accountant, he continually saw that his clients were not being served well by their financial advisors. Todd now blends his vast tax knowledge with his passion for seeing his clients thrive financially. Outside of work, he enjoys spending time with his wife, Kandace, biking, gardening, fishing, perusing estate sales, and trying his hand at new recipes (especially baking). To learn more about Todd, connect with him on LinkedIn.
The opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
All investing includes risks, including fluctuating prices and loss of principal.