How a Financial Professional Can Guide You Through Choppy SeasSubmitted by CalBay Investments, Inc. on June 4th, 2020
In these trying times, even those with veins of steel can find themselves nervous about the market's direction and what it could mean for one's financial future. And the unprecedented nature of the novel coronavirus—and its ability to shutter businesses and services nationwide—can make it hard to take lessons (or comfort) from previous corrections and recessions. Fortunately, the objective data and guidance a financial professional can provide can go a long way toward calming an investor's frayed nerves. Learn a few of the ways a financial professional can help guide you through even the choppiest waters.
Reviewing Your Asset Allocation
During times like this, it can be tempting to focus on factors outside your control: things like account balances and rates of return. A financial professional can instead help you focus on what you can control, including your contribution level, your contribution frequency, and your asset allocation. This is especially important if you're hoping to retire soon, as maintaining riskier investments going forward may not be in your financial best interest.
By reaching an asset allocation you're comfortable with during good and bad times, it can be easier to relax during market turbulence. You'll know that you've taken the steps you need to in order to preserve your portfolio from uncompensated risk.
Showing Historic Trends
When markets are crashing, it can be tempting to pull funds out (or at least convert to cash) to preserve what you still have. But your financial professional can point out to you that more than half of the top 20 Dow Jones Industrial Average (DJIA)'s single-day biggest losses were within two weeks from one of the top 20 single-day biggest gains.1 Meanwhile, missing just a few of the top market days each year can take one's rate of return from positive to negative.2 As many professionals state, "don't just do something, stand there!"
Moving funds into cash after a huge drop runs the risk of losing out on an equally sizable gain. Your financial professional can show you, in black and white, the importance of staying the course during market turbulence.
Finally, your financial professional can keep the lines of communication open so that you're able to seek guidance or information whenever you have a question about your investments. Many financial professionals make a practice of sending out letters to their clients or reaching out by telephone or email when the market is especially volatile, and having this person-to-person reassurance can go a long way toward helping you feel comfortable with your investments' future performance.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.
Asset allocation does not ensure a profit or protect against a loss.
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