• Zack Gutches

3 Things to Consider During This Market Downturn



The fact is that the markets are down over 30% in the past ~1 month. Today's post is not going to talk about why, or give opinions on anything related to the Coronavirus. You've probably already received 40 emails in your inbox about that. Instead let's talk about what is actually meaningful during a period like this from a financial perspective.


#1) It needs to be said -- market timing is a fallacy. So stop thinking you are the exception! If the smartest investors in the world who have been researching and investing in the markets full-time for the past 40 years can't consistently time the market, neither can you! Many of us believe that to be true on the surface of our minds, but we still believe in our hearts that just maybe this time is different. Unapologetically, this time isn't different.


Here's the thing: markets don't always behave rationally and logically. Even if it makes absolutely no sense why the market would respond to something so irresponsibly, it doesn't matter because supply and demand is what drives the market. Here's another thing: In theory, the market has all available information and expectations priced into the current price at all times. But this may not always be the case. How much of the market downturn is related to uncertainty and fear of the unknown, and how much is downgrades because of declines in Q1 or Q2 corporate earnings expectations (and how they compare to actuals)? Unless you have access to some crazy information no one does, can I tell you that there's no way you could possibly know what's already priced in and to what extent.


#2) The productive thing that every single person who has investments in the stock market right now needs to do (if you haven't already), is to evaluate how losing X percent of your portfolio makes you feel. Get a journal and write it down. Seriously right now go and do it -- you probably have the time :) Really get in touch with your emotions and assess how you are feeling right now about losing whatever percent you've lost in your portfolio. Are you anxious? Worried? Losing sleep? Wanting to sell? Jot all your thoughts and feelings down. Here's why:


Many people evaluate their "risk tolerance" during a period of market prosperity. C'mon, it's pretty easy to say you would be fine with losing half your investment portfolio when things are and have been going extremely well in the markets for the last 10+ years. We love to talk a big game about how we aren't afraid of risk when there doesn't appear to be testing times in front of us. Put your ego aside. Now is the time to honestly evaluate how we feel and what level of risk we are actually okay with. And rest assured, there isn't necessarily a wrong answer to this. Just write down what you feel. If you are losing sleep over a 30% loss in your investments, can you imagine what a 60% decline would be doing to your health?


Oh and if you aren't having any internal behavioral reactions during this downturn, write that down. Learn to understand yourself through this exercise. So again:


Set aside some solitude for yourself to evaluate your risk tolerance and write down your thoughts and feelings in a journal.


#3) Preface: People who thrive on impulsiveness are going to hate this. Hang in there. You can do it.


If you haven't already, establish a set of "investing principles" for yourself. Figure out some sort of systematic approach that you agree to (not grudgingly, but one that you actually are excited about and believe in). My encouragement to you would be to stick to the plan. I know it feels so unnatural and challenging. I know that every ounce of your inner being wants to buy up a ton of a depressed stock right now, or on the flip side to sell everything that's getting crushed. I would encourage you to fight those desires if they don't align with your principles. Here's why:


In an ideal world, you developed your set of investing principles and your plan before the turmoil, and presumably when you were in a healthy emotional state. And potentially with guidance from a professional. Enter the recent sharp declines and the heavy fear of the unknown, and what happens? Your thinking can easily get muddled. The clarity you had when you developed your plan is gone, and you are in Fight or Flight mode. You've lost focus of the plan and instead are solely focused on "What stock will rebound up the highest?" Remember, your plan (if done right) looks at your holistic life, and it aligns with your goals, your values, and gives you insight into what's truly important during times of uncertainty like we are experiencing right now.


If you want professional guidance on establishing investment principles and a plan, please contact us and we would love to refer you to a fiduciary investment professional who specializes in this. Having a preset plan in place can help you weather the storms of life with confidence and even peace.


Additionally, if you are struggling during this time, please utilize our free consultation call, and we would love to hear about you and your situation, and assess how we can help guide you through this difficult season financially. Although potentially counter-intuitive on the surface, having a trusted professional to help guide you through these times of uncertainty are the best decision you can make.




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