No one who hears that the markets are down thinks, “Oh, good. I’m so glad we’re going through a downturn.”
But when the market is down, it can actually be a great time to take stock of your current portfolio. Similar to an ailment that gets you back into a doctor’s office and reminds you to get your yearly physical, a market downturn can be a great wake-up call to make sure your investments are in order and even learn whether there are additional investment opportunities. Even if you didn’t plan in advance for coping with a downturn, you can use it as a chance to reevaluate your investment strategy.
Consider this your Silver Linings Playbook to help you handle a market downturn with grace. This is your opportunity to review investments and make sure your strategy provides exposure to different areas of the markets to help match the overall risk in your portfolio.
Not everyone’s playbook is the same, though. You may be a cautious, savvy, or novice investor. Make sure you’re asking the right questions for your situation.
You’re a cautious investor if…
- You already have an advisor and trust him or her with most of your financial decisions.
- You’re a good saver.
- You take a long-term view on your investment strategy.
Your Silver Linings Playbook: This may be the time to consider shifting some of your savings into investments that can provide lifetime income.† Consult with your advisor to learn if this is a good time to “buy low” in an effort to increase your upside potential when the market recovers. This could be your chance to make progress towards your goals for retirement.
You’re a savvy investor if…
- You have a great relationship with your advisor.
- You also do a lot of research on your own and consider yourself hands-on.
Your Silver Linings Playbook: This may be a great time to get in touch with your advisor about opportunities that seek capital growth. In reviewing your portfolio together, you may find this is a good time to consider a variety of products, including an annuity.* Today’s diverse investments offer the chance for you and your advisor to tailor tactics to fit your personal strategy.
"A market downturn can be a great wake-up call to make sure your investments are in order and even learn whether there are additional investment opportunities."
You’re a novice investor if…
- You don’t have a financial advisor.
- You’re fairly passive about your investments and let them sit in a 401(k).
- You haven’t started investing and aren’t sure what your investing goals would be.
Your Silver Linings Playbook: This may be a great time to get started! Investing doesn’t have to be time-consuming or complex, especially if you work with a financial advisor who understands your goals and can partner with you to create a tailored investment strategy designed to help you reach them. If the market downturn makes investing sound risky, an advisor can introduce you to ways to pursue growth, while employing strategies designed to manage risk. Check out How to Find the Right Financial Advisor for You to learn more about how to select an advisor that best suits your needs.
It’s normal to react to a sudden shift by wanting to jump ship, but you have a chance to regain control by staying the course. By keeping the bigger financial picture in mind, you can fortify your personal financial strategy. No matter where you are in your financial journey, you can find a silver lining in a market downturn.
*What is an annuity?
Annuities are long-term, tax-deferred investments designed for retirement. Variable annuities involve risks and may lose value. Earnings are taxable as ordinary income when distributed and may be subject to a 10% additional tax if withdrawn before age 59½. Optional benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity.
Annuities are not for everyone. And, it’s important to remember that these products are meant to be long-term investments designed for retirement, so there are restrictions in place to discourage you from withdrawing all of your money at once or taking withdrawals before age 591/2. However, most annuities do allow for exceptions based on specific circumstances such as a terminal illness or other emergencies.
† Optional living benefits are available for an extra charge in addition to the ongoing fees and expenses of the variable annuity. Guarantees are backed by the claims paying ability of the issuing insurance company.
Investing involves risk, including possible loss of principal.
The opinions and forecasts expressed are those of the author and individuals quoted and should not be construed as a recommendation or as complete.