Talking to Your Financial Advisor During Market Volatility

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When market volatility occurs, it’s completely natural to feel anxious about your finances. This is an uncomfortable time for all investors – seasoned and new. 

It’s important to remember that market volatility is nothing new, and staying the course is usually the best plan of action. But if you aren’t working with a financial advisor, now may be the right time to get started. They can help you put together a plan that’s designed to weather times like these. 

Already have an advisor you trust? Great! You’re in good hands. They’re watching what’s going on in the markets and making any adjustments, if necessary. But should you have any questions, always know they’re there to answer them for you. 

We’ve put together a list of questions that can help get the conversation started – and it begins with something you should be asking yourself. 

Ask yourself: How much risk am I actually comfortable with?

Times like these can make us all want to pull back a bit on the reigns and take a more conservative approach with our money. But are you reacting to the current volatility (in which case you may want to stay the course)? Or have you experienced a life change such as marriage/divorce or bought a new home? In the latter case, it may be time to adjust.   

One great way to gauge your risk tolerance is with our Risk Survey. It’s quick and easy to take and it can help you better identify your current mindset. If your risk tolerance has changed, it’s time to reach out to your advisor. That way, they can adjust to your new way of thinking. 

Ask your advisor: What is the current state of my plan?

Your advisor will most likely start the conversation off by sharing a report detailing how the market decline has affected your portfolio and your plan. This is the time to dig in and really look at what’s going on with your finances. 

Clarify how the current situation could affect your plan in the near and future terms. Will you need to adjust your budget for living expenses? Or put off retirement for a little while? Having all of the information up-front can help guide the rest of your conversation. 

Also, look for assets you’ve held for tax reasons that may have imbalanced your portfolio. These assets could have declined enough where you can sell, or losses may be available in other securities to help offset those gains.  

Ask your advisor: How is my portfolio designed to get me through markets like this one?

Diversification is important even when the markets are performing well, so it’s even more vital in times like these. Your advisor has built your portfolio with a healthy mix of investment types that can help you weather the inherent ups and downs of the market. 

Rebalancing your portfolio can be helpful in periods like this one. By moving back to the target allocation, you’re naturally buying assets that have gone down the most and selling those that have done well. Keep in mind that sometimes your tax situation may make rebalancing less desirable.  

Ask your advisor: How do markets with rising interest rates and inflation different from other difficult markets?

Be sure to ask your advisor what they’ve included to help during rising rate environments and times of inflation. Interest rate cycles are measured in decades, not in weeks or months, so it’s important that your portfolio goes beyond just stocks and bonds.  

Some asset classes may perform well during inflation. But, as with anything, there are pros and cons to hedging for inflation. Talk to your financial advisor about whether this approach fits with your goals and investment style.  

Because interest rates have increased, the difference between yields from different investments have widened. Moving assets out of your checking or savings account and into an investing account may be a good way to take advantage of higher rates.  

Your financial advisor is here for you.

Always remember: Your financial advisor is here for you in good times and bad. They can answer your questions and provide objective guidance to keep your mindset fixed on the longer term. If you’re not working with an advisor, now is a great time to get support. Let us help you connect with a professional who will tailor your plan to your existing needs and long-term goals. 

 

The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Re-balancing may be a taxable event.

Before you take any specific action be sure to consult with your tax professional. A diversified portfolio does not assure a profit or protect against loss in a declining market.

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