Ever since the pandemic changed life as we knew it in the first quarter of 2020, we’ve all been strapped into an economic rollercoaster ride.
With interest rates and inflation at their highest levels in decades, ongoing economic turmoil in Europe, unresolved geopolitical tensions worldwide, and widespread fears of a possible recession, global markets may remain volatile for some time.
Knowing how to safely navigate market volatility will be the key to preserving your capital, growing your nest egg, and building generational wealth—no matter what the markets might be doing.
Of course, when it comes to investing, not letting your emotions get the best of you is a lot easier said than done. If you’ve never considered working with a private wealth advisor before, maybe it’s time to rethink your options.
Here are three ways private wealth advisors can help you expertly navigate market volatility:
1. Invest from a position of strength, not weakness
There’s a big difference between becoming wealthy, being wealthy, and knowing how to manage wealth. The vast majority of our clientele are independently wealthy or inherited wealth, but they were not confident when it came to their investments.
This is very normal, by the way. Unless you work professionally as an investor or asset manager, there’s no reason you should know how to fine-tune a portfolio worth millions, especially during such trying times.
You won’t have the advantage of decades of perspective into market rallies and pullbacks, the know-how to properly manage risk and hedge your bets, or the tried-and-true estate and tax planning techniques that can effectively lower your taxes and preserve your capital.
Simply put, if you aren’t confident in your investing strategy, then you will operate with a scarcity mindset, which can make you emotional and undisciplined. That’s not where you want to be.
The best way to stay calm during volatile market conditions is to invest from a position of strength. This means having a solid financial foundation that helps you feel secure and gives you the confidence to invest wisely and stay the course.
As we like to tell all of our clients, “One good investing strategy trumps 100 good investment decisions.”
If you want to stress test your financial foundation, ask yourself the following questions:
- What’s the breakdown of my safety, market, private and aspirational assets? Getting and keeping this allocation right—and tailored to your situation—is crucial.
- How volatile is my investment portfolio when stress-tested? Under top 10%, bottom 10%, and mean market scenarios over the last 100 years?
- What does my portfolio breakdown look like? By sector, size, style (e.g, growth vs. value), profitability factors, and balance sheet strength?
- What’s the expense ratio of my portfolio? Is it lean or quite expensive?
- How is my portfolio being managed? Is it reviewed regularly, methodically, and proactively? Or is management sporadic and reactive?
2. Be a proactive investor, not a reactive panicker
Of course, long-term investing success doesn’t just boil down to investing from a position of strength. It also depends on how well you deal with dangerous emotions when they sneak up on you.
When market volatility strikes, it’s natural for many investors to feel nervous, anxious, and restless. This causes them to react impulsively based on their emotions, which can lead to buying high, selling low, and a whole lot of regret by the time they retire.
In our experience, not being proactive in a variety of ways to build a solid portfolio and balance sheet with staying power increases the chances of making poor, emotionally driven investment decisions at the wrong times.
For example, if your portfolio plummets 20% or more (which it may very well have in 2022), what do you do? Do you immediately panic sell it all and cut your losses short, keeping cash on the sidelines to buy the bottom? Do you react, blown every which way by changing winds?
Or do you acknowledge the volatility and go back to business as usual, relying on your professional advisor to navigate the ominous investment environment seeking the opportunities that often come out of such times, and potentially rebalancing the portfolio?
Do you have a long-term investing strategy and wealth optimization plan that you can confidently follow, no matter what the markets are doing? Are you looking into other ways to lower your risk without panic selling?
In other words, are you being proactive rather than reactive?
Hint: It helps to have an accountability partner if you want to be a disciplined investor.
3. Broaden your investing perspective and think long-term
When you’re constantly in the trenches or hearing news reports designed to trigger a fight or flight response, it’s easy to lose sight of what really matters. Likewise, if you’re unsure about your investing strategy or the direction your portfolio is headed, it helps to zoom out and remind yourself why you’re building wealth.
During times of market volatility, it can be tempting to focus on only the negatives, which narrows your investing perspective. If this happens, you’ve put on blinders and you’re only seeing the red in your portfolio. Everything will start to look risky and dangerous.
When your investing perspective narrows to a single point like that, or when “fight or flight” becomes your mission in life, your wealth is in great danger.
The fear of missing out (FOMO) can cause you to make rash decisions with your investments. Before you know it, you could get stuck in a cycle of panic selling and fear-based buying, a surefire way to eventually blow up your portfolio.
If you’re feeling stressed out about the markets, broaden your investing perspective. Intentionally remind yourself of why you’re doing this—your investments are all part of your long-term plan to build a bigger nest egg and generational wealth for your family.
Keeping your investing mission in mind will help you stay disciplined with your investing strategy even when times get tough, just like Warren Buffett has for nearly 80 years (he’s done pretty well for himself by sticking to his investing strategy).
Whenever you feel panic start to set in, stop refreshing your portfolio every minute and ask yourself: “What am I really trying to achieve?”
Do yourself a favor by remembering why you’re invested in the first place. Don’t worry about what Jim Cramer or the other talking heads are saying. At the end of the day, only your long-term investing goals matter.
A private wealth advisor can help you stay disciplined
In business, in life, and in wealth, having a trusted advisor makes everything much easier to manage. Investing, in particular, carries unique risks and even emotional volatility that most people are not used to and are unable to cope with.
That’s why having a trusted, fee-only private wealth advisor with the fiduciary responsibility to honor your best interests is so important to generational wealth building.
The right private wealth advisor will be a complete wealth mentor who takes the time to learn about your investing journey so far, including your risk tolerance, your family’s investing goals, and your long-term vision for your wealth.
Janiczek Wealth Management has been named among the top, best, and most exclusive financial advisors in the nation for decades. W can help you:
- Navigate market volatility and stay focused on your long-term investing goals, minimizing losses and taxes while maximizing opportunities.
- Avoid panic selling during times of market stress, which could leave you with fewer assets than you planned for in your retirement years.
- Avoid the temptation to time the market and “buy at the bottom,” which is perhaps only a little better than gambling at slots.
- Create a bespoke, resilient investing strategy that accounts for bullish rallies, bearish downturns, years-long recessions, black swan events, etc.
- Achieve investing certainty and peace of mind so that whatever happens in the markets, you’ll be confident you’re doing the right thing.
Here’s more details on upgrading to a top ranked private wealth advisor:
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