Market volatility is an investment reality

Recent days have seen the stock market drop. Until this past week, the market has been remarkably calm while trending upward for quite some time. We understand these market drops can create anxiety, but, adjustments like this are healthy over the long run. We would also like to reiterate two investment realities:

1. Volatile markets are more normal than calm markets. On average, the stock market drops 5% or more three times per calendar year. Over the past 13 months, however, the market has not seen a drawdown of more than 3% until this week! Despite that unusual streak, market dips are a regular occurrence often bouncing back as fast as they drop. It’s this type of uncertainty in stocks that allows the reward of long-term growth.

Aligning your investment plan with your financial plan allows us to help allocate appropriate resources more conservatively for short-term needs while pursuing risk-appropriate growth for long-term priorities.

2. A diversified approach (vs. trying to time unpredictable markets) can be more profitable over the long run. We have not veered from the belief in diversified portfolios aligned with your personal financial goals and risk tolerance.

We are prepared for market corrections in the way we construct investment portfolios. Typically, the broad stock market exposure in a portfolio is coordinated with broad fixed income (primarily high-quality bonds) for stability, flexible strategies (that can move around based on market outlook — i.e. reduce risk as needed -or- seek growth opportunities), and diversifier strategies (that hold real assets like real estate and investments that are not so closely aligned with the direction of the stock market). The coordination of these different components reduces the need to guess when to go to cash and more critically, guess when to get back in.

We are neither surprised nor unnerved by the recent market pullback, but we understand questions can arise. If you would like to discuss your investment plan before our next scheduled review meeting, please do not hesitate to contact us.

Talk with us about your portfolio or financial plan here: Talk with an advisor

More Reading: Focus on What You Can Control

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