Your Volatility Survival Guide: Five Things to Remember When the Market Drops

When Markets Get Volatile, Here’s How to Get Real

You can’t always tune out the news. But as an investor, it’s always worthwhile to keep the headlines in perspective. Especially when market volatility confronts you with a nonstop barrage of stories, statistics, and opinions that make you think the sky is falling. To avoid making potentially costly and unnecessary moves with your portfolio, step back and consider these five things to help ensure you’re getting the real picture.

Recognize the Real Media Bias

As investors, understanding how a business makes its money is fundamental to our decisions. So we should bear in mind that the media companies feeding us our daily dose of market mayhem make their money by capturing attention. What strategy does the typical successful media source employ? Appealing to our emotional instincts in preference to the rational part of our minds. Whether it’s a 20-car pileup on the interstate or a sudden drop in the market before the closing bell, negative headlines help drive positive bottom-line results for those who serve them up.

Balance the Real Risk Versus Headline Risk

Weigh the short-term risks conveyed in headlines driven by today’s 24-hour news cycle against the actual risks facing your portfolio, which may have a time horizon extending to many years or even decades. Are things really as dire as they sound? Are the events in the news affecting the actual economy, or are they merely generating web clicks, viewers, and subscriptions? Remember how short-lived most news is—and how long-term your financial goals are in comparison.

Get the Real Perspective: Percentage vs. Points

If you based your expectations about market performance on the news, you might very well believe that the sky actually is crashing down. With all the headlines concerning tariffs, trade wars, Facebook, Amazon, Syria, the Mueller Investigation, etc., it would seem that the market must be in trouble. And for those who have been investing since the days when a 200-point drop in the Dow was huge, recent multi-hundred-point swings would seem to reinforce that. But here’s the thing—at today’s much-higher stock market levels, a 200-point drop is less than a percent. In fact, for all the headline pyrotechnics over the past several months, the S&P 500, a commonly referenced benchmark for the U.S. large-cap market, was down slightly less than one percent for the quarter.

Understand the Real Plan

Review your own financial plan, and ask yourself how much it’s actually affected by the events of the day—both headline news and market gyrations. Also, ask yourself how many of those events are in any way within your control. Most likely, you’ll recognize that the impact of transitory events on the strategy designed to achieve your long-term goals is negligible. And, in fact, the attempt to anticipate, influence, or effectively modify your financial planning in response to that steady flow of news is likely to be unproductive at best.

Consider the Real Spectrum of Information

When strategic fine-tuning of your portfolio is indicated, it won’t be triggered by the headlines that typically dominate the daily news. Strategic decisions should always be based on comprehensive knowledge of the full range of relevant data. EP Wealth Advisors is monitoring the headlines just like you are. However, we also monitor many other things that the mainstream headlines do not cover. These include but are not limited to leading economic indicators, the path of interest rates, wages, and inflation both domestically and globally. One of the best antidotes to emotion-based decisions is data—not just data provided by news headlines and articles, but by research that reveals truths hiding beneath the surface. For a closer look at the types of things we consider when helping you develop your plan, execute it and stay on course, we invite you to read our Quarterly Review and Outlook. And to learn more about the services we offer, visit our website, and feel free to contact me for a detailed discussion.

Disclosures:
EP Wealth Advisors (“EPWA”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. EPWA has used its best efforts to verify the data included here. The information presented was obtained from sources deemed to be reliable. However, EPWA cannot guarantee the accuracy or completeness of the information offered. All expressions of opinion are of the author of this blog and subject to change without notice.

Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.

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ABOUT THE AUTHOR

Clint C. Camua, Vice President and CFP®, began his career in the investment industry in 1993 after graduating from the University of Redlands. He earned a Bachelor’s Degree with a double major in Biology and Political Science. He later received his Master’s in Business Administration from the University of Southern California in 2001 with an emphasis in Finance and Marketing. Clint obtained his series 7, 63, and 65 licenses working for brokerage firms Morgan Stanley and Charles Schwab. During his time at Schwab, Clint was promoted to branch manager. He was in charge of compliance and supervision of investment consultants. Clint transitioned from brokerage to wealth management by joining RNC Genter Capital Management and later Glencrest Investment Advisors as Vice President, managing client relationships. He joined EP Wealth Advisors in 2007. He and his wife reside in Simi Valley, CA and enjoy traveling and the outdoors.

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