UPSIDE OF A DOWN MARKET

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BY SUZANNE HAZLETT, MBA, CIMA®, CFP® 

Suzanne Hazlett, MBA, CIMA®, CFP® is the founder of Hazlett Wealth Management, LLC.

I originally published the topic of this column on March 18, 2020. The stock market crash of 2020 began just nine days prior, on Monday, March 9, with history’s most significant plunge for the Dow Jones Industrial Average to that date. Two more record-setting declines followed on March 12 and March 16.

Unbridled global fears about the spread of the coronavirus, oil price drops, and the possibility of a 2020 recession triggered the drop. Sound familiar?

Legendary investor Warren Buffett doesn’t try to guess how current events will play out in the market. “I don’t think I can make money by predicting what’s going to go on next week or next month,” he said. “I do think I can make money by predicting what will go on in the next ten years.”

When the state of the financial markets is keeping you up at night, here are four things you can do:

1. LONG-TERM vs. SHORT-TERM

If your investments are for long-term purposes, remind yourself time is on your side. If you have invested in a long-term strategy with funds needed for current expenses, you may need to sell at least enough investments to meet your immediate cash needs.

2. RISK APPETITE

It is prudent to periodically reassess your tolerance for the market’s roller-coaster nature. Many advisors use risk assessment tools. They can help clarify the risk associated with your performance aspirations, informing suitable investment decisions.

3. BALANCING ACT + TAX-LOSS HARVESTING

Rebalancing is a tactic used by professionals on an ongoing basis. When financial markets shift, they can impact the balance of different types of assets within a portfolio. Selling some assets and reinvesting those dollars in others is a clever tactic to use when your investments get too heavily weighted in one area and underweighted in another. When making these changes in taxable accounts, selling securities showing losses allows an investor to “harvest” those losses to offset gains and income and potentially reduce your tax bill.

4. DOLLAR-COST AVERAGING

If you are working at building your nest egg, a down market can be advantageous. Continuing incremental investing allows you to invest over time when values are low, positioning you to benefit when values increase, averaging your investment costs and volatility exposure.

A down market can present opportunities and provide valuable reminders. Take a breath. Assess your plan. If you find yourself off course and your investments are not aligned with your intended strategy, you may be able to get back on track by taking these four steps.

Suzanne Hazlett, MBA, CIMA®, CFP®  HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities through Raymond James Financial Services, Inc., member of FINRA/SIPC. All investing involves risk, including the possible loss of the principal amount invested. There are no guarantees investing strategy, including rebalancing or dollar-cost averaging, can guarantee will meet your objectives. 675 Sun Valley Road Ketchum, Idaho, 208.726.0605. HazlettWealthManagement.com

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