The new year has not been kind to investors. In fact, to put it bluntly, it’s been downright brutal from the very start. The only bright spot is that we know what fueled the sudden downturn. Just take a look at what’s going on around the world.
There were the North Koreans testing a nuclear weapon. Or at least
they’re claiming to. In China, a steadily sagging economy is
perpetuating a staggering slide in their stock market. And in the rarely
stable Middle East, tensions remain high between Iran and Saudi Arabia.
All this uncertainty has spurred an economic slowdown, which, in
turn, has lead to dramatic drops in commodity prices. Oil prices have
been the most visible; we see them every day at the pumps. But copper
and steel have also taken terrific tumbles.
Yes, there’s no doubt about it. The world has been dealing with an onslaught of unsettling news.
In the midst of the uncertainty, there is a bit of good news. At least
domestically. Our own auto companies are reaching unprecedented heights.
In 2015, car sales were 17.5 million. While it wasn’t by much, it was
enough to break the record of 17.4 million set in 2000. But bright spots
notwithstanding, the pervasive mood is still one of caution and
As a financial advisor who has guided many households through
unsettling times, I suggest everyone keep a level head. Yes, it’s
upsetting to see your daily account values tumble, but changing your
financial course in the middle of a downturn may hurt your nest egg in
the long run.
Of course, you could sell all your investments now and buy them back
when things get better. But while this strategy may work for a rare few,
in my experience not many investors ever get it right on both ends.
They typically sell at the bottom and re-enter near the top.
Most are better served by developing a diversified strategy and
maintaining it throughout economic cycles. Generally, it’s a good idea
leave things to the money managers you had confidence to manage your
funds in the first place
They follow your investments and the economic climate daily,
affording them the opportunity to jump on opportunities that can add to
the value of your portfolio.
Unfortunately, in the investment world it’s too easy to pull the plug
on your well-thought-out plans. More often than not bad things happen
when fear takes control.
Imagine you’re on a commercial flight and your plane suddenly
encounters some severe turbulence. Would you consider asking the pilot
if you could take over and land the plane?
That doesn’t make any sense, but that’s exactly what some are doing
with their money. Modifications in your portfolio may be appropriate
during a review. Tweaking a portfolio periodically may be in order. But
total abandonment? It seldom turns out well.
Abandoning your strategy may make you feel better initially. But in
the long term, the odds are your nest egg will suffer. I understand that
it’s difficult to see account values fall. But I’m confident that
investors who stick with their strategy will be rewarded for their
I don’t know when the slide will stop or the market will turn around. But I do know both events will happen.