Is a Downturn On the Horizon? How We Watch Over Our Clients’ Investments

Is a Downturn On the Horizon_ How We Watch Over Your Money

By Ed McClure, CFP®, PPC®

Sometimes what causes the greatest fear is simply not knowing what lies ahead. Billionaire and founder of Patagonia, Yvon Chouinard, said, “Fear of the unknown is the greatest fear of all.” 

It seems as though things in our world right now could not get any more unknown. Most of us dislike this level of uncertainty (to put it mildly), but do you know what dislikes it even more? The market. 

Case in point: The Dow recently experienced eight weeks of consecutive losses this year, and the S&P 500 tallied seven weeks of losses. (1) As a result, many economic leaders are predicting a recession in our near future. (2)

We can point to many factors as the cause of our recent nail biting: rampant inflation, the Fed’s solution of increasing interest rates, and international unrest. But the fact remains that we have no control over any of that. 

For better or worse, we at McClure Wealth Management want to help you take a deep breath and walk through whatever our markets decide to do. Here’s how we’re watching our client’s finances and taking proactive steps to help safeguard your wealth.

Big-Picture Planning

We don’t make investment decisions based on what everyone else is doing or what’s popular in the investment 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 can come again. We also use asset allocation “buckets” that divide your wealth into short, intermediate, and long-term strategies with the goal of helping you make the most of a volatile market.

In times like this, it’s important to have an emergency fund or a percentage of your portfolio that is either in cash or liquid enough should you need to access 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 can protect you against having to sell investments at low values. 

We Know 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. And, 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. 

Finding the Opportunity

Many advisors will agree that you should not attempt to “time the market.” That being said, when the market is way down, there might not be a better time to buy. 

There is an analogy that I use sometimes when I’m giving a talk to a roomful of employees: Imagine that stocks are like shoes and that your goal is to accumulate as many pairs of shoes as possible before you retire. Right now, shoes appear to be undervalued! Predicting when a stock’s price will reach bottom is impossible, but if the stock is undervalued, it could be a great time to buy.

People often panic when the market is down because they are afraid that it’s just going to keep dropping. Is it possible for one company’s stock price to drop all the way to zero? Yes, if the company goes out of business. Is the whole market going to drop to zero? No. That didn’t even happen during the Great Depression, and a lot of regulatory changes were put in place that have made the same scenario unlikely to happen again. As long as people continue to buy and sell goods and services, there can always be value in the stock market.

Timing Matters

During the recession of 2008 and 2009, I got a lot of calls from people who were thinking of pulling their money out of the market. You might hear someone say that they lost money because their stocks lost value, but that’s not true. You don’t lose money unless you sell while your investment is down.

If you are a decade or more away from retirement, you can likely wait out a recession or correction and potentially benefit if there is a 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 can 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 less risky investments like money markets or short-term bonds. Because retirement can last decades, you still want some of your money in investments that have the opportunity to produce long-term growth, but your portfolio may look very different from that of a 40-year-old in the peak of their working years. 

We Are Your Emotional Support System

When your portfolio value takes a sharp drop, it can be easy to react emotionally. A top investment rule is to refrain from making emotional decisions. If you stay true to your investment strategy and avoid making decisions when emotions are running high, you can decrease the risk of losing even more.

Remember that bear markets have happened before—and they can happen again. If you’ve created a disciplined financial plan and have a trusted advisor monitoring your money, you’re doing your part to prepare. But do you need someone to turn to when the market gets wild?

At McClure Wealth Management, we aim to be a go-to trusted resource for people like you, and our mission is to help clients achieve the financial independence and well-being they deserve so they can give their time and energy to the people and things they love. We’d love to support you as we create a plan to help build your finances for a strong future. To get started, give me a call at (760) 607-0611 or email [email protected] to set up a consultation.

About Ed

Ed McClure is a CERTIFIED FINANCIAL PLANNER™ practitioner, Professional Plan Consultant® (PPC®), and founder of McClure Wealth Management. With over 25 years of experience, Ed works with business owners who want to maximize their retirement plan benefits, businesses that need help setting up and managing a 401(k) for their employees, and families who want guidance while planning their futures. He is known for simplifying complicated and intimidating topics and making wealth management concepts easy for others to remember and understand.  

Ed has established himself as a trusted resource for business owners and individuals, and his mission is to help his clients achieve the financial independence and well-being they deserve so they can give their time and energy to the people and things they love. He has a bachelor’s degree in finance from the University of Illinois. In his spare time, Ed conducts financial workshops for the Just In Time for Foster Youth organization, which helps equip young men and women as they come out of the foster care system. He also loves to travel and spend time with his favorite people. To learn more about Ed, connect with him on LinkedIn.