Calming the Fear After Market Loss

Based on historical trends and current data, CWM is planning for volatile market conditions to continue for at least the next three to six months. In uncertain times like these, discipline is the best way to handle adversity.

CWM’s investment philosophy is designed to manage risk, and navigating the turbulence we’re currently facing demonstrates the soundness of our approach. During the third quarter of 2019, our team’s analysis of key indicators detected upcoming market vulnerabilities. We made the intentional decision to shift our clients’ portfolios to conservative positioning, which took discipline as the market was experiencing an upswing at the time. We avoided the “shiny object syndrome” and instead poised our clients to sidestep the downside many investors are experiencing today. This also has allowed us to position for future opportunities.

For those whose investments have been negatively affected by the recent turn of events, here are some next steps to consider for the future:

  • It’s too late to prevent a loss that’s already occurred. Don’t panic and flee to perceived safety after the fact, or you risk missing out on recovery. Be careful not to assume markets will keep falling just because they have fallen recently. Lower prices eventually create opportunity.
  • Focus on immediate needs. Build (or rebuild) your foundation of safety, typically three to six months of short-term expenses. Don’t raid your rainy-day fund to try to replace investment losses. Avoid losing sight of your immediate needs by becoming swept up in recouping what you may have lost.
  • Rebalance 401k and other investment accounts. If you are practicing proper diversification, at least some of your assets should have held up well during this recent downturn. Those holdings may now make up a disproportionate segment of the overall portfolio; rebalancing will sell a portion of those assets in order to pursue opportunities to buy low.
  • Continue making, and even increase, contributions to your 401k and other investment accounts. The best time to buy is after market selloffs – buy low!
  • Buying low decreases your risk and creates opportunity. Stock selloffs are never uniform and exploring hard-hit economic sectors may open new possibilities.
  • Diversify. Keep in mind there is more than one way to diversify your portfolio. Consider diversifying across companies, industries and asset classes to help spread your risk and your opportunities for success.
  • Have patience. The months directly after large market selloffs are usually highly volatile, which can be scary. Have disciplines and remain true to them; remove emotions, like fear, from the equation. 


If you or someone in your network needs a second opinion from an informed, disciplined advisor, we are here to help. Visit our contact page to arrange a complimentary, no-pressure phone call.


This material is for general informational purposes only and is not intended to be a substitute for specific professional financial, tax or legal advice. Individual circumstances may vary.

Investing involves risks including the potential loss of principal. No strategy, such as diversification or rebalancing can assure success or protects against loss. Rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability. Past performance is no guarantee of future results.

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