FINANCIALLY
Speaking
F . E . A . R .
False Evidence Appearing Real
1 .
Jeffrey M . Orth is a Chartered Financial Consultant , a Certified Advisor in Senior Living , and an Investment Advisor Representative , with over 15 years of experience as a business and personal planning , insurance , and wealth management specialist . Jeff is available for group lectures and private consultations . Visit ifitfinancial . com or call 408.842.2716 .
The author ’ s opinions , comments information , etc . are those solely of the speaker and are independent of , and do not represent , HTK , and should not be considered as specific investment or planning advice . Please consider your options based on your individual circumstances . gmhToday and other listed entities are independent of and un-affiliated with , HTK and Integrated Financial
About six months ago , a client called me saying he was so concerned about a market correction that he wanted me to convert his all of his investments to cash . After discussing the possible outcomes of such an emotional decision , he decided to stay the course . As it turns out , converting his investments to cash would have been a costly mistake , as his portfolio was designed to endure downturns and actually had some guarantees built in that he had forgotten about . Fear can make a coward of anyone . With that in mind , I would like to share some thoughts about market declines .
Stock market corrections are an inevitable and natural part of investing . Having said that , it is also the last thing most investors want to experience . Although we can never know when a decline will occur or how long it will last , the way you react to market downturns will play a critical role in your long term investment success .
Here are some ideas that could help you cope with a market decline :
Maintain a Diversified Investment Portfolio It ’ s a good idea to help lower the overall risk of your portfolio by spreading the risk between different investment types . You want investments that have a low correlation with each other , so that when part of your portfolio is down , the rest is still up . A good wealth manager can help you with this part , by introducing you to investment opportunities that you might not be aware of .
Invest Regularly – in Both Bull and Bear Markets Investing on a regular schedule , or ‘ dollar cost averaging ,’ can help take some of the emotion out of investing . This strategy calls for investing the same amount of money at consistent intervals , most commonly once a month . With this approach , you don ’ t have to guess which way the market is going . And when the market is heading down you purchase more shares at a lower price .
Although it doesn ’ t guarantee profit or protect from loss , dollar cost averaging is a way to take advantage of a declining market . Of course , for this to work , you must be willing to keep investing while stock prices are dropping , and the market news is negative .
‘ Stress test ’ Your Investments Take a look at how your individual investments did in past down periods . Just as importantly , how did they respond when the market turned back up ? Although the past is no guarantee of future performance , a look at history can be revealing .
Invest for Income Income producing investments can be an investor ’ s best friend during market declines . After all , an investment is yours whether the stock price is falling or rising . Investments that tend to do well in market declines include stocks that pay high dividends , as well as fixed income investments ( also known as bonds ). The bonds will produce a steady flow of income during a down market . Reinvesting the dividends of a stock that is currently down will allow you to buy more shares at the lower price and may improve your portfolio ’ s performance when you emerge from a correction .
Annuities with Living Benefit Riders May Offer Some Useful Guarantees A deferred variable annuity with a living benefit rider can offer guarantees that can help you protect and grow your future retirement income , despite market downturns . Also , the death benefit of a variable annuity will not be less than the net amount of money placed in the account , and with some riders , it will increase . This can help protect your loved ones from loss if you were to pass away .
Consider the tax consequences of selling your investments . If you have a taxable account , it would be wise to evaluate the tax consequences before selling in a market decline as there could be significant build-up of capital gains . You need to be of aware your tax liability for this action . It would be prudent to talk with your tax advisor before you actually sell .
Talk with a Financial Advisor The thought of a market decline may prompt you to re-examine your strategy with your financial advisor . Take another look at your investment goals , time horizon , risk tolerance and financial circumstances . Have any of these things changed since the last time you spoke ? Keep a long term perspective . If nothing has changed , then perhaps it may be a good idea to stick with your original plan .
Courage is not the absence of fear , but rather the ability to overcome it . Fortunately , you don ’ t need to face market volatility by yourself . By partnering with an experienced Financial Advisor , who understands your goals for the future , together you can plot the best course in troubling or uncertain times .
Benefits Network ( IFit ). Registered Representative of , and Securities and Investment Advisory services offered through Homor , Townsend & Kent , Inc . ( HTK ).
Registered Investment Advisor Member FINRA / SIPC , 16845 Von Karman Ave , Ste . 225 lrvine , CA 92606 ( 949 ) 754-1700 . I Fit is independent of HTK . CA Lic # 0C49291 © 2016 The Penn Mutual Life Insurance Company , Philadelphia , PA 19172
24
GILROY • MORGAN HILL • SAN MARTIN SEPTEMBER / OCTOBER 2017 gmhtoday . com