The Bear Market Balancing Act
Let’s face it. In this bear market, everyone is performing some sort of balancing act.
It may be the recently-minted stay at at home parent who is balancing conference calls, while taking care of multiple children who, because of the pandemic have school cancelled indefinitely. Perhaps, it’s the small business owner who is balancing the decline in sales, and trying to provide for her family. In these times, I can name a handful of “essential” workers, who are balancing the stress of their work hours far into the week nights and weekends.
For me, it’s been balancing the desire to be the voice of calm for my clients, while working through the realities of a bear market — a first for me as a owner of a firm, and a first for many of my younger clients.
A market decline is never fun. While I am confident that markets are efficient, and that this too shall pass, I continually remind myself and my colleagues that everyone deals with these events differently. And now, more than ever, is the time to be the voice of reason and more importantly, empathy.
To help reduce the load of your personal balancing act, below are some tips that could help you weather the storm:
- Revisit and Adjust Your Budget: The backbone of every strong financial plan will be a budget that has line items for every dime that you make, and every expense that takes away from that balance. In these trying times, it’s important for you to know exactly what you’re paying for every single month. By revisiting your budget, you may find opportunities to cut costs on subscriptions, dining and other leisure activities. These costs can be redirected into areas such as your investments contributions or to padding your emergency fund.
- Do Not Obsess Over Investment Statements: The S&P 500 has seen over a 20% loss over the last three months. Unless all of your funds have been in cash, you can expect this to translate in your next months investment statements. Unfortunately, matters may get worse before they get better with positive cases of the novel corona viruses still increasing, and the economic effects still to be determined. Now is not the time to obsess over statements, but to trust the process and survey capital markets for opportunities that will yield premium returns over the long run.
- Continue to Invest Systematically: If you’re a younger investor, this is your first rodeo. Giddy up! In the last financial meltdown, you were likely in high school or college, and didn’t have any “skin in the game” to be impacted, nor learn the very important lessons that come with downturns. Today, you’re probably asking yourself if you should stop contributing to your 401(k) account via your employer. There’s a two part answer to this question: Part 1) Refer to your budget. If you’re in a cash flow crunch, consider finding savings there first before pausing your contributions. Part 2) No. Don’t do it. Here is where the battle is won. Here is where the good investor, becomes great. Here is where you buy investments at lower prices, and with patience, are able to watch them mature into their proper value. Stay the course!
- Don’t Commit Panic Selling: There you are. The investor that has built up his nest egg. You were around for the burst of the tech bubble, the financial meltdown of 2008 and you find yourself feeling all of the emotions that come with “another again.” Only this time feels different, and you have more assets than you may have had in either of the previous recessions. This is the part that most advisors would tell you not to sell. I believe that you already know this painful truth. Instead, let’s take a walk down memory lane. In those events, how did you feel? What happened to your portfolio? What did you learn? This bear market has happened swiftly and aggressively, and no one could’ve seen it coming. When these troughs happen, they hurt. Yet, when they correct themselves, they typically do so just as swiftly and rigorously — the returns on average being upwards of 30%. The surest way to lock in losses is to sell, and that would excuse you from being a participant of a fruitful rebound.
- Seek Out Opportunities: Bear markets provide many different opportunities. The most obvious is the purchases of investments at lower prices. With the cutting of interest rates, there’s opportunities to refinance expensive loans that could save you hundreds, or even thousands of dollars overtime. This is a unique bear market because all of the opportunities are not financial. Because many of us are forced to stay home, you have the opportunity to show your spouse how much you love them, spend quality time with your children, read a book, or simply get some rest. Treat yourself to some of life’s priceless opportunities.
- Prioritize Safety: We are in the midst of a very serious pandemic. People are losing their lives, and families are being permanently affected. Be sure to wash your hands for at least 20 seconds, temperature check yourself if you’ve been outside in highly impacted areas, remain socially distant, resist handshaking, and to wear a mask especially if you have an underlying health issue. I’d rather have you safe, than sick or… just kidding, practice these measures and you’ll be fine.
- Talk to Someone: Very few things in life are meant to be experienced alone, and through rough times sometimes the best remedy is just venting to someone. Whether it’s your friend, financial advisor, therapist, or infant child, oftentimes a listening ear can make all the difference.