By Kevin Boutwell, CFP® and Mike Collopy, CFP®
After a three-year rally, the financial markets have been down for seven straight days, marking their worst slide since the pandemic decline in March of 2020. Monday’s market dip put the S&P 500 down over 10%, which is officially called a “correction” on Wall Street.
In addition to the stock market decline, inflation has been causing concerns. Because inflation is reaching 40-year highs, it is expected that the Federal Reserve will begin raising interest rates in the spring, which could potentially slow the economy.
Investors are understandably nervous about their investments and their purchasing power. If you are worried about your portfolio, you’re not alone. But during stock market volatility, it’s important to keep a level head to avoid financial mistakes.
At times like these, it’s important to put current conditions into perspective. This is not the first time the market has taken a tumble and it won’t be the last. Declines in the Dow Jones Industrial Average are actually fairly regular events. In fact, drops of 10% or more happen about once a year on average:
Ride Out the Uncertainty Storm
It’s important to remember that markets dislike uncertainty. Currently, there is a lot of uncertainty regarding the continued coronavirus pandemic, inflation, interest rate hikes, tensions between Russia and Ukraine, and earnings reports due out for several large technology companies.
With so much uncertainty, volatility right now is extreme. The VIX, or the market volatility index, is at the highest level in nearly a year. As we get more information, it is likely that day-to-day market fluctuations will decrease.
There’s an old saying that the best thing to do when you meet a bear market is the same as if you were to meet a bear in the woods: play dead. While easier said than done, successful long-term investors know that it’s important to stay calm during a market correction. We don’t know yet whether the coronavirus fears will translate into an official correction, but the risk always exists.
Market volatility has increased in recent years and the media can often make it seem like each episode is worse than the one before. In reality, volatility does not hurt investors, but selling when the market is down will lock in losses.
Remember That Your Portfolio Is Diversified
Fears about inflation, volatility, and market declines are stressful. However, it is important to keep in mind that while the stock market is down, your portfolio is made up of both stocks, bonds, and other assets that are designed to work together to decrease overall losses. It’s important to consider your specific portfolio, investment horizon, and circumstances when reflecting on economic events. If you have questions about your portfolio, get in touch with our office.
Review Your 401(k) and Other Accounts
Now is a good time to take a look at all of your investment accounts, including your 401(k) to make sure it is well diversified. If you have not rebalanced your other investment accounts in the last year, get in touch with our office and we’ll take a look and offer recommendations to minimize potential losses.
Speak With Your Advisor
Whether you’re new to investing or an experienced investor, it’s helpful to consult with an objective third party. Human nature causes us all to act out of emotion when our accounts go down. As an independent firm, we put your best interests first. We seek to serve as a support system for our clients, helping them make informed financial decisions that aren’t driven solely by emotion.
We’re Here for Your Friends and Family
If you have friends or family who need help with their investments, we are happy to offer a complimentary portfolio review and recommendations. We can discuss what is appropriate for their immediate needs and long-term objectives. Sometimes simply speaking with a financial advisor may help investors feel more confident and less concerned with the day-to-day market activity.
Schedule a complimentary introductory call by reaching out to us at 1-844-508-7884.
Kevin Boutwell is a wealth advisor and partner at Veracity Capital. With almost a decade of experience in the financial industry, Kevin has acquired expertise in managing equity compensation. He focuses his services on corporate executives who have complicated compensation packages and resulting tax headaches. He believes that proper financial planning drives the best investment decisions, and his customized process and strategies help his clients achieve better outcomes. Kevin prioritizes building long-term relationships and offers the perfect mix of analytical, problem-solving, and a personal touch so that his clients can focus on what’s important, knowing their finances are taken care of.
Kevin is a highly decorated veteran former U.S. Navy pilot. He got his start in the financial industry at Goldman Sachs and is a CERTIFIED FINANCIAL PLANNER™ practitioner. Kevin earned his Bachelor of Science in Mechanical Engineering from the Georgia Institute of Technology and an MBA from Indiana University’s Kelley School of Business. Out of the office, you can find Kevin staying busy with his family, including his young triplet sons. He stays involved with several non-profit veteran organizations and participates in the Georgia Tech mentoring program. When he has a spare moment, he enjoys staying active with CrossFit and occasionally a round of golf. To learn more about Kevin, connect with him on LinkedIn.
Mike Collopy is wealth advisor and partner at Veracity Capital. As a fiduciary who puts his clients’ interests first, always, Mike is known for providing a holistic perspective on his clients’ finances. His comprehensive process first looks at the big picture of each client’s family, health, and wealth, then drills down to provide solutions for their financial needs, concerns, and goals. He’s passionate about the science of financial planning and investing and uses that to help his clients build a strong foundation for their financial life. Mike serves career-driven individuals who need professional advice to manage their wealth and maximize their opportunities, such as corporate benefits and complicated compensation packages. He considers his clients to be his family, and strives to support them and their families as they work hard for their financial future.
Mike has a bachelor’s degree in finance from Coastal Carolina University and an MBA from The College of Saint Rose. He is also a CERTIFIED FINANCIAL PLANNER™ practitioner. When he’s not working, you can find Mike spending time with his wife and young son, often exploring the great outdoors by hiking or enjoying the beach. He likes to stay active, playing basketball and training for half marathons. Mike gives back to the community by supporting organizations dedicated to finding treatments for cystic fibrosis. To learn more about Mike, connect with him on LinkedIn.
Advisory services offered through Veracity Capital, LLC, a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.