When markets go nuts, financial advisers get emailing

Tony Wagner Aug 26, 2015

Starting with China’s Black Monday, the Dow’s brief 1,000-point drop and a couple more “roller coaster” days, we’ve been reporting, offering perspective and trying to answer your questions about this crazy week the markets are having.

While we’ve been doing all that, we’ve been getting emails from our personal financial advisers, who are doing more or less the same thing.

“I encourage you put the changes in the market into perspective and to remain positive,” wrote one Washington-based financial planner in an email to clients, including one of our editors. Put a different way, by our own Kai Ryssdal: “This is not 2008.”

Investing comes with some risk, and in turn, the adviser writes:

…Difficult moments when the market pulls back. Those feelings are normal. Still, it is financially important to stay the course during these downturns, as selling when the market falls and then buying back when the market recovers will lock in current losses and likely put you at a disadvantage.

The Vanguard Group expressed a similar sentiment in an email to clients, including two of our staffers: “How should you react to the recent market decline? Stick to your plan.”

They included three rules in a post on its website: 

  1. Recognize that volatility and periodic corrections are common in equity markets.
  2. Tune out the noise, and remove emotion from investing.
  3. Make volatility work for you.

Business Insider notes that Goldman Sachs took a similar tack in a note to major investors, reminding them that a diverse portfolio means they don’t need to react to the equity markets.

In our view, this month’s volatility is a reminder of the importance of several principles of portfolio construction: Diversified sources of return matter. While we believe selloffs may create stock­specific buying opportunities, an overreliance on equity markets may create vulnerabilities in volatile environments. Investors should, in our view, consider strategies which seek to limit downside exposure.

In a brief sent to clients, an Ameriprise Financial senior economist notes that the market was overdue for a correction, and Monday’s cratering of the Dow is temporary and things may get slightly worse in China before they get better:

Continue to focus on the long-term number one, and stay on task. A few down days, particularly in light of generally mild volatility levels this year, should not set-off the panic button. The U.S. remains a key source of global economic strength and trading activity over the last two days does not change that. If economic and corporate trends can continue to improve—there is room for U.S. equity markets to move higher from here, in our view. However, be prepared for the potential of increased volatility and the potential for disappointments along the way.

JP Morgan also talked about China’s slowdown in a report sent to clients this week. Economists there say China’s slowdown is partially due to declined outsourcing from Europe, Japan and the U.S.:

Finally, Quartz illustrated the folly of being reactive Wednesday with a game that lets you choose to sell and buy as a random decade of S&P growth flashes buy. You might be able to time things out and beat the market, but it’s very, very difficult.

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