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Movers & Shakers: Preparing for Market Volatility

Movers & Shakers: Preparing for Market Volatility

May 17, 2022
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As a mover and a shaker, you stand on the shoulders of giants. You’re part of a long line of risk-takers, shaking up your industry with big ideas and innovative solutions.

But just because you’re shaking up your industry doesn’t mean you should also shake up your finances.

When it comes to your finances, be a mover. Move toward financial security without shaking up your chances of having the retirement and leaving the legacy you desire.

What’s the Black Swan of Finance?

Many of our clients start off by managing their own portfolios by piecemealing different methods and strategies together. However, they often contact us once they see their portfolio drop in large percentage points due to market volatility. If their portfolio percentage points can drop more than they expected, what else can happen that they aren’t expecting?

In the finance industry, we call a seemingly impossible and unpredictable dire outcome in the market “the black swan.”

While the black swan event is rare, it’s not impossible. That’s why we recommend speaking with a CERTIFIED FINANCIAL PLANNER™ professional to avoid worst-case scenarios in your own portfolio.

Common Causes of Market Volatility

Changing interest rates

The Fed raised interest rates in March 2022 for the first time in 4 years, and it’s predicted they will raise rates 6 more times this year!

Economic issues such as supply chain shortages

Many factors have affected supply chain shortages like the pandemic, the war in Ukraine, and labor shortages. Supply chain shortages sometimes resolve without making long-term effects on the economy, but oftentimes, they cause market volatility that could last for a long period of time.

Extreme investor fear or greed

Fear and greed are powerful emotions that can influence the direction of the stock markets. When fear dominates, many investors are concerned with avoiding losses which can result in a stock selloff driving stock prices much lower. When greed dominates, many investors are concerned with maximizing returns which can drive stock prices much higher.

Steps to Building Financial Confidence

Diversify your portfolio

One measure that may help your portfolio in times of market volatility is diversifying your portfolio across many different types of investments. Many professionals in the industry say it another way: “Don’t put all your eggs in one basket!” Check out this video from our Senior Financial Advisor, Ken Askew, to hear about how diversification can help when the market shows signs of volatility!

Build more savings

Having a savings account of 3-6 months of income prepares you for worse-case scenarios like losing your job or needing to pay for added expenses due to inflation. But it also helps in the short term as you reevaluate your portfolio during times of market volatility.

Maintain a comprehensive financial plan

A comprehensive financial plan helps you stay focused on your financial goals. It helps you align your investment risk with your personal risk tolerance. It also helps to keep you from being side tracked by the news headlines or the financial commentary of the day.

Seek advice from a trusted financial advisor

When you seek advice from a CERTIFIED FINANCIAL PLANNER™, you can trust that they will put your needs above their own since they are fiduciaries. Many professionals out there may offer you advice, but the only way to know it is in your best interest is when they hold a CERTIFIED FINANCIAL PLANNER™ professional and fiduciary distinction.

Let Us Guide You to Financial Confidence

We can guide you toward financial confidence so that you can sleep easy in retirement. If you would like to learn more about how we can help you navigate market volatility, contact us today!

Sources: 
https://www.investopedia.com/terms/b/blackswan.asp
https://www.nytimes.com/live/2022/03/16/business/fed-meeting-interest-rates