Investment
Strategies
Financial adviser Vaughan Scott says investors
should prep for when bull chases bear
by Valerie Zell
T
he stock market has always been
compared to a roller coaster.
These days, however, it may feel
more like one of those rides that
drops you like a rock. But rather
than run for the amusement-park exit, New
Albany investment adviser Vaughan Scott said
it’s more important than ever to strap in, hang
on and keep your eye on the prize.
“When you have all this volatility, especially
in times of duress, people get scared,” said Scott,
CEO of Southern Indiana’s Axiom Financial.
“But at the end of the day, it’s making sure people
have a real plan, and that it’s based on their goals
and needs, and that they really stick with it.”
I have a retirement plan. What should
I do?
If you’re a Hoosier who’s actively sav-
ing for retirement, Scott said now is a perfect
time to meet with your financial adviser (most
retirement-plan administrators include access to
experts) and evaluate whether your portfolio is
still on the best track for you.
“It’s important to rebalance when the market
conditions are low, then do it again once it goes
back up,” Scott said. “Equities get out of balance
at the bottom and the top.” But even rebalancing
should happen with precision and
an eye on the end game, he said.
If investors don’t stick to their
plan — or don’t have one to begin
with — they can end up making
bad decisions based on emotion,
Scott said, like attempting to pick
individual stocks, or allowing those
stocks to make up more than 3 to 5
percent of a portfolio.
Investors can also run into trouble if their
portfolios aren’t diversified to include a variety
of assets, such equities, mutual funds, bonds or
commodities. When done properly and accord-
ing to an individual investor’s plan, he said, a
diversified portfolio is already designed to better
weather a downturn.
What if I don’t have a retirement plan?
If you haven’t yet created a retirement invest-
ment plan, Scott said that although it may seem
counterintuitive, a down market is the perfect
time to start. “Historically, every bear market has
been followed by a bull market, and there’s no
reason to believe that won’t occur this time,” he
said. “The key is to make sure that you’re posi-
tioned for the recovery.”
One thing Scott said individuals shouldn’t
do, however, no matter what’s happening on
Wall Street, is take matters into their own hands.
Especially during volatile markets, he said, inves-
tors can make decisions based on fear or even
greed that can hurt them in the long run. A good
financial adviser can give an unbiased, rational
opinion on what to do — even if the best course
of action is to do nothing.
“We’ve always been doers,” Scott said. “We
feel like we have to do something, but pausing is
doing something. Especially when there’s signifi-
cant stress.”
Scott said that the pandemic is likely to leave
its mark on the financial markets — although it’s
too early to tell what those might be — but he
does believe that investors may come out with
a different perspective on wants vs. needs. “I
believe we’ll have a better perspective on a lot of
things,” he said.
May / June 2020
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