It’s a volatile time to be an investor. Though the losses have mostly been recouped in the last month, American markets cratered in December.
How should those of us with a portion of our wealth in the stock market approach volatility like this? Financial advisers across Philadelphia gave their best take on how best to sail through choppy waters.
Stay Calm
“Panic,” says Mark Samson, “is not a strategy.”
Samson is the president of Samson Wealth Management Group in Fort Washington and has been involved in personal financial planning for 28 years. One of the most important factors to consider when investing, he said, is to find out what level of risk you’re willing to stomach.
“Have an asset allocation you’re comfortable with,” he said. “It is a more volatile period than most.”
But in six months? Two years?
“A blip,” he said.
Steven Schwartz, managing partner at Samson and in the business for 25 years, agreed with Samson about managing risk on a personal level.
“If you’re losing sleep every night,” he said, “then your investments are probably not in line with your risk tolerance. Just make sure you’re speaking to your adviser.”
Eric Salmansohn, executive director of Liberty Wealth Management in Philadelphia (owned by Morgan Stanley), is more specific about the volatility.
“Morgan Stanley believes this is a cyclical correction within a secular bull market,” he said. “Last quarter was especially volatile, with December 2018 being the worst December since 1931.”
However, like Samson, he feels that taking the long view in the face of changes will serve investors well.
“Bottom line — stay focused on goals and broader trends in profitability, innovation and economic growth.”
Opportunity?
Even though the market takes a beating now and then, that doesn’t mean it’s all bad. In fact, Samson said, it can be an opportunity.
Samson relates a familiar analogy when discussing the opportunities inherent in a down market.
“If you’re investing for the next 10 years to save for retirement,” he said, “you want the market to come down. Things are on sale.”
“I don’t rush to the mall when they’re not having a sale,” he added.
Goals
According to Salmansohn, one of the best ways to ensure that a volatile market doesn’t affect your portfolio too much is to invest with specific benchmarks in mind.
“Investors should have a clear purpose,” he said. “We use a goals-based planning system to focus on objectives, diminishing the importance of market fluctuations.”
Samson goes by a “110” rule — take your age, and subtract 110. After removing the negative sign, that’s what percentage of your portfolio should be in the stock market, tweaked a bit in either direction based on the type of investor you are.
Schwartz, too, reminds investors to keep focused on goals.
“The short-term volatility, although it can be scary, shouldn’t necessarily deter from your focus on where you’re headed in the long-run,” he said.
jbernstein@jewishexponent.com; 215-832-0740
