March Newsletter to Clients

Enjoy this month’s edition that features a list of strategies to help navigate market volatility.

Moneywatch was founded by my father, Bob Bova, over 40 years ago. Care to guess how many stock market corrections – S&P 500 declines of more than 10% - there have been over those decades? 37! Furthermore, on average, a 5% decline in stock market prices has occurred 4.6 times per year over the same period.
 
With yesterday’s decline the S&P 500 slid into correction territory for the 38th time over those decades. Our experience has taught us that, although we certainly can’t control the market, there are things we can do to protect you and even take advantage of persistent market downturns:

•    One of the benefits of employing a financial advisor is to help remove emotion from decision-making. We at Moneywatch look at your portfolios and the funds we employ every single day so you don’t have to;
•    Timing the market is impossible. Multiple studies have shown that trying to sell before a market downturn and buy again at the bottom is not only highly difficult but can lead to poorer portfolio performance than just staying the course. For instance, a study done by Index Fund Advisors showed that if an investor sold at the wrong time and missed just the 40 best market days over 20 years, their portfolio would see a loss of 104%;
•    Keep funds needed within the next year in more stable investments. For those of you taking Required Minimum Distributions or know you will need to withdraw funds within the next year or so, we generally employ this strategy of keeping that amount in cash or in short-duration bond funds that are designed to fluctuate in value less than other investments. We do this regardless of market performance;
•    Diversify. You knew I was going to mention that, right? While the S&P 500 index of large, U.S. stocks has declined so far this year, the Barclays Bond Index is up. And international stocks, as measured by the MSCI EAFE index, are up too. So far, diversification is working as designed in our portfolios;
•    Market volatility can provide opportunities. Again, we aren’t market timers but we do look for opportunities to buy assets that we believe are under-valued;
•    Buy on sale. For those still contributing to their retirement accounts, a market downturn can be an opportunity to buy assets on sale. If your cash flow will accommodate it, increasing your contributions during a downturn is a great way to buy more shares. Buy low, sell high is a much more effective strategy during a downturn. 
Wherever the market is headed over the next few months, hopefully these thoughts will help you sleep better. As always, we welcome the opportunity to talk about your investments and portfolios. 

Thank you for your continuing confidence.