By Scott Hamilton
Watching the news these days can feel a little like riding a roller coaster. Things are up and down and constantly changing. With all this instability, it’s no wonder investors are purging stocks out of recession fears. Most of us dislike this level of uncertainty, but the stock market likes it even less.
As of June 6, the Nasdaq and S&P 500 are on an 8-week losing streak, with brief gains in the past week. (1) Even some of the major players have seen declines, with Apple losing 16.9% so far this year and Amazon losing nearly all of the gains it saw during the pandemic. (2,3)
Due to these declines, many economic leaders are predicting a recession in our near future. (4) Some contributing factors include:
- Rampant inflation
- Increasing interest rates
- International unrest
While we can’t control what happens in the world and the markets, we can control what we do with our finances. At Hamilton Financial Planning, we’re here to help walk you through creating a solid financial plan that can withstand the ever-changing market trends by watching over your finances and taking proactive steps to help secure your wealth.
Table of Contents
Big-Picture Planning
We don’t make investment decisions based on what everyone else is doing or what’s popular in the investment industry. Whenever we make planning decisions with you and offer investment recommendations, we do it with your goals at the forefront. When the markets get shaky, we go the extra step of reviewing your objectives to make sure you’re still on track and make educated decisions that are not based on panic or emotion.
This starts from the very beginning of our relationship with you. We use conservative return numbers when analyzing the potential outcomes of your plan because we know that corrections and bear markets will come again. We also use asset allocation “buckets” that divide your wealth into short, intermediate, and long-term strategies to help you make the most of a volatile market.
And in times like this, it’s even more important to have an emergency fund or a percentage of your portfolio that is either in cash or liquid enough if you need it for unexpected circumstances. While cash investments may not provide a lot of growth, having a cash contingency fund with at least one year’s worth of living expenses will protect you against having to sell investments at low values to free up cash.
We Know Your Risk Tolerance
Do you know that feeling in the pit of your stomach when you make a decision that was too risky for your comfort? Our goal is to help you avoid that feeling when it comes to your investments. Before investing any of your money, we determine your risk tolerance, the amount of risk that an investor is comfortable taking or the degree of uncertainty that an investor can handle. Like most things in life, your risk tolerance may change with age, income, and financial goals. We don’t want you to lose sleep at night, so we review your risk tolerance and how much risk you can afford to take and adjust your investments over time.
We also watch over your money like a hawk, and when it’s time to get out of an investment because the risk is rising, we will contact you about adjusting your allocation.
Timing Matters
During bear markets, it’s important to remember that investors only realize losses when they sell, so it’s critical not to sell when the market is down. When you need to access your money is an important factor in avoiding those losses. For example, if you are a decade or more away from retirement, you can likely wait out a recession or correction and benefit from the recovery. If you need access to your funds in the next five years or are within your first five years of retirement (frequently known as the “fragile decade”), (5) a recession will make more of an impact on your money and your plans.
From a practical perspective, we make sure your portfolio’s allocation is set up with your time horizon in mind. If you need money in the short term, your portfolio will hold safe investments like cash or short-term bonds. Because retirement can last decades, you still want some of your money in investments that will produce long-term growth, but your portfolio will look very different from that of a 40-year-old in the peak of their working years.
We Are Your Emotional Support System
It’s easy to worry and get emotional when the markets go up and down and you’re not sure how it will affect your investments. But it’s important to remember not to make rash decisions during this time. If you stay true to your investment strategy, regardless of what the markets are doing, you won’t run the risk of losing even more.
The best way to protect your investments is to work with a trusted advisor to create a disciplined financial plan and help monitor your money. If you don’t have someone you can turn to, we’d love to support you and help build your finances for a strong future. Schedule a complimentary get-acquainted meeting online or reach out to us at 512-261-0808 or scott@hamiltonfinancialplanning.com.
About Scott
Scott Hamilton is founder and chief financial officer at Hamilton Financial Planning, a wealth management firm that specializes in providing comprehensive financial planning for retirees. With over 20 years of experience in the financial industry, and having completed over 250 financial plans for retirees across all industries, but mostly the oil and gas industry, Scott is passionate about providing his clients with the tools and insight they need to achieve their financial goals. He has a Bachelor of Business Administration in finance from Texas State University and an MBA in international finance from Pepperdine University. Scott has also been happily married to his wife, Gayle, for over 25 years. To learn more about Scott, connect with him on LinkedIn.
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(3) https://www.cnbc.com/2022/05/10/amazon-stock-has-lost-nearly-all-of-its-gains-from-the-pandemic.html
(5) https://www.lifehealth.com/navigating-retirements-fragile-decade/
