Our Action Plan in Response to the Markets

“Sell when everyone is greedy and buy when everyone is fearful” -Warren Buffet

We want to communicate our action plan as we move through this time of market volatility and uncertainty.  As we have told all of our clients many times: We buy quality assets, allocate portfolios between stocks, bonds and some alternatives based on an individual’s risk tolerance.  Because of this strategy, the vast majority of our clients have not experienced nearly as large of a percentage decline in value of their accounts as the stock market as a whole. Active vs. Passive investing has worked! We understand that the markets will fluctuate and we also understand that they have always moved on to new highs after every period of volatility and uncertainty. We do not see why this situation will be any different.  All of this said, we will be taking steps to maximize what we view as a current opportunity that the market has provided for us.  We will be taking the following steps:

  1. For anyone that is taking monthly or annual distributions from your account, the distributions will be taken from the cash position or “fixed income” bond positions that are held in your account until stocks rebound and trade at a higher level. This will avoid “selling low” in our equity positions and aims to allow them to take maximum advantage of a market rebound.  In the event that this becomes an extended bear market, and we are forced to sell equities in certain accounts, which we do not anticipate based on the precautions that we have taken in accounts that are in distribution mode, we will sell them on a “bounce”.  Remember, we have “stress tested” client accounts through our Monte Carlo simulator, especially those that are taking distributions, and have accounted for these types of situations.
  2. For anyone that is making monthly or annual contributions to their accounts, we will be investing these contributions (unless a client directs us otherwise) into the equity (stock) sleeve of the portfolio. This strategy seeks to allow us to take maximum advantage of stocks that may be trading at what we consider a favorable price to buy.
  3. Once it is clear that the market has settled, we will likely shift some investor money from bonds to stocks to overweight equity positions (unless a client directs us otherwise) to once again take advantage of what we believe is an opportunity that this bear market will create.
  4. For newly invested clients that are slowly moving into the markets, we will likely accelerate the dollar cost average and buy in at a quicker rate than originally planned to take maximum advantage of the opportunity that is being created.
  5. If you are contributing to a 401K at work, based on your risk tolerance, you might consider temporarily directing all of your contributions into the equity portion of your investment options. If you need help sifting through those options, we can help.

Although we understand that it can be unsettling when markets are volatile, we are highly encouraging our clients to base decisions on sound investment advice as opposed to emotions.  In the 100+ year history of the S&P 500, the economy has endured so many “crisis” situations and we believe that it will endure this one just the same.  What we do not currently know is the timeline how the events will unfold. If you have questions about your account in specific, please do not hesitate to give us a call or set up a meeting….or wait….maybe a video conference is better 😊.