How to create a strong financial fortress during market downturns

Hey Confidante Community! Jackie and Jin are back with strategies on how to create a strong financial fortress during market downturns. The best that we can do in circumstances that are out of our control is face the music! So here are strategies to help you build that fortress for your finances and be better prepared for 2023

 

Let’s talk about facing the music!

Facing the music in this situation is looking at those investment statements, looking at the credit card statements and developing an approach to sort them out. Investing and staying invested over a long period of time is very important as it is dangerous to make panic decisions and follow what others are doing. Jin’s favorite quote is be greedy when others are fearful and not the other way around. This may be a good time to start investing in the stock markets.

 

How does the market downturn impact investors?

There have been about 11 to 12 instances when the US S&P500 has declined by more than 10% since and including the great depression. On average, the stock market increased by 6.4% the year after, 35.1% 3 years after, and then 5 years 80%. If we look at our last market crash before this, which is in 2008, the S&P next year, 47.6% 3 years after, and then 126% after 5 years. This is why investors need to be patient and understand how the investments they purchased have behaved over the short and long term and potentially how they may recover and continue to grow. The good thing with investing long-term is also that you get learn how the market works and benefit from the market recovering. The last time the market went this low was 14 years ago and we never know when we would have this kind of deal again on stock prices.

 

How do we advise clients who are holding back from investing with hopes that the market will go lower?

It is almost impossible to predict the markings of the bottom or top when it comes to the stock market. You also want to be weary of predictions by ‘experts’ because even they can’t predict what will happen, they only guess until it eventually happens. Investing with the intention of having a quick turnaround isn’t realistic if you want that maybe visit a casino! Timing the market is difficult and the only way to play the game and win is to be in the game at all times.

 

Lets talk about how financial advisors can influence clients to stay invested long term

It is easy to talk about the market numbers and think of strategies to avoid making a loss but, it some clients get emotional when they see their investments go down especially if they don’t have experience in the market. What we do is give them reassurance based on our expertise so they don’t make a rash decision they will eventually regret. Our goal is to help clients stay invested and committed to the journey. It is easy to feel confident when you are making money,

but what happens when things go down? Do you have a plan? This is where building a financial fortress matters and having a solid plan that outlines what your investment goals are and how you can retire comfortably. It’s important to create a customized plan for your finances!

If you are buying and anticipating a short-term return and making quick decisions, you are essentially gambling with your future.

 

How do we help clients who fear a complete market crash?

We get this a lot from clients and the answer is, it is very unlikely to happen as long as we still live in a capitalist economy. The stock market and the bond market are the core mechanisms that make a capitalist economy work. Truth is, if the stock markets were to go away, it means that money will become pointless. So, if we ever get to this point, we will have bigger problems than a market downturn! Being financially resilient requires you to focus on the things you can control.

 

Here are some key take aways to help you build a strong financial fortress

 

● Get a handle on high interest debts.

● Figure out how much you need to be comfortable in retirement.

● Stay invested and understand how the investments you own will behave in the short and long term

 

If you want to have a second opinion on your portfolio and are ready to build your financial fortune, please reach out to our team. Reach out to jody.euloth@askjackie.ca. Also, feel free to share your questions with us here or on our social platforms.