High inflation, geopolitical tensions, and pandemic uncertainties. Couple these challenges with steep losses in both stocks and bonds, on top of slowing economies. Whether you serve as an investment committee member or simply effort to make the best of your own portfolio, we know this can feel unsettling and we are here for you.
With this year generating anything but warm-and-fuzzy feelings for investors, here is our suggested three-pronged approach to give your portfolio a fighting chance of prevailing.
Adopt a near clinical approach (if you have not already)
With stocks and bonds suffering significant losses and bad news coming forth daily, it is more important than ever to recall – or establish – goals for your portfolio. I have written many times about Fiducient Advisors’ use of our Three Levers exercise that helps clients construct portfolios. Rather than being struck smitten with trendy investments, this approach focuses on your desired goals, outside of the portfolio (e.g., a university may seek to provide more scholarships), and then assesses the Three Levers of financial inflows, outflows and required return as the basis for portfolio design.
If your investment strategy was built in clinical fashion with a link to broader goals, “sticking with the plan” becomes a little easier in these turbulent times. The objective is to avoid unnecessary risk, and for whatever risks you do assume, make sure they are necessary and in support of broader goals.
But what if, to this point, you have not invested in disciplined fashion and perhaps have assumed more, or less, risk than is appropriate based on your goals? There is no time like the present to finetune your objectives and make certain your portfolio is constructed in a manner that provides strong probability of success.
Whether you are an individual investor, a retirement Plan Sponsor or a nonprofit with an endowment or foundation, adopting this disciplined approach shifts the focus from the “here and now”, which will pass, and appropriately emphasizes strategy over fear.
Tap into Fiducient resources
Knowledge can truly provide an edge for investors in tumultuous times. I do not suggest that you must possess a professional-level, highly technical understanding. But having an appreciation for the frequency of bear markets and recessions, and knowing that there are cycles to much of this, can help investors avoid pressing the panic button at the wrong time.
You will find an abundance of useful resources in the Insights section of Fiducient Advisors’ website. Below, I provide links to several that are especially timely and useful at this stage of the market.
- Third Quarterly Quick Take of 2022
An episode of our podcast providing timely market and economic updates, including important portfolio implications for investors.
- The Bear Market Field Guide
A concise piece addressing the frequency of market and economic downturns along with pitfalls of market timing.
- Tips Tuesdays Video: The Bear Market Field Guide
Short video providing additional insights on market timing and why your feelings, as an investor, might betray you at precisely the wrong time.
- Portfolio Rebalancing: The Easiest Difficult Decision an Investor Can Make
Timely pointers for rebalancing your portfolio amidst the volatility.
- Five Investing Paradoxes
An episode of our podcast offering strategies for dealing with volatile markets beyond attempting “market timing”.
Let Fiducient Advisors help you control the controllable.
Though it would be nice, we know that how markets behave is beyond our control. As identified above, it is beneficial to adopt a clinical approach and to possess a good understanding of historical patterns to avoid dangerously reactive decisions. But does that mean we are resigned to passively wait for things to improve. Absolutely not!
There are many things a prudent investor can do, even during a bear market, to help improve their odds for success.
- Thoroughly examine your entire fee structure. From ensuring you own the lowest cost fund share classes, to custodial, trading, and other costs, we work diligently on your behalf with the purpose of having fees minimally impact your results.
- Become intentional with your ESG and DEI policies. A wide range of investors are studying, evaluating and implementing mission-aligned strategies and a bear market should not dissuade you if this is a topic of interest. Fiducient Advisors attempts to not only help educate clients, we also proactively require more and better reporting from investment managers. Discover more about our mission-aligned investing here.
- Harvest losses where appropriate. In taxable accounts, this type of downturn presents opportunities to thoughtfully realize long-term gains and harvest losses. Find vast insights in our 2022 Financial Planning Guide and learn more about our services for private clients here.
Not fun though perseverance historically prevails
This year, higher-risk investments like stocks and venture capital are down meaningfully, but so are traditionally conservative holdings like bonds. We understand this can be unsettling for investors. I hope the strategies and insights shared here will help you weather the storm and improve your probability of success over the long haul. Please feel free to reach out to any of the professionals at Fiducient Advisors for assistance on these matters. We are here for you.
The information contained herein is confidential and the dissemination or distribution to any other person without the prior approval of Fiducient Advisors is strictly prohibited. Information has been obtained from sources believed to be reliable, though not independently verified. Any forecasts are hypothetical and represent future expectations and not actual return volatilities and correlations will differ from forecasts. This report does not represent a specific investment recommendation. The opinions and analysis expressed herein are based on Fiducient Advisor research and professional experience and are expressed as of the date of this report. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Past performance does not indicate future performance and there is risk of loss.