Down market would seem like good time to grab bargains

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Most times, people love a bargain.

“We try to get people to look at it as saying, ‘I’m interested in that pair of shoes, but it’s a $200 pair of shoes,’ ” said Bill Shaheen, president and chief executive officer of Whitney & Company. “That same pair of shoes is now on sale for $150. Well, you’d probably go buy the pair of shoes.”

Yet that perspective evaporates when it comes to investing in a down market.

“When people look at stocks, sometimes they do the opposite where they panic and instead of buying at that point, they sell,” Shaheen said.

“We see people where they get nervous about the market and anxious and they say well I’m going to stop putting money in because it just keeps going down. In reality, they should be putting more in if they can.”

As market gyrations continue to test investors’ fortitudes and headlines scream inflation and recession, advisors encourage clients to stick to plans that have been meticulously devised to meet goals.

Investors who plan to remain at their jobs ought to continue adding to their retirement plans. Investors already tapping those funds may want to keep a little more cash on hand but keep the bulk of the portfolio invested and positioned for recovery. Rebalancing and staying diversified throughout sectors are good ideas throughout your investment life.

“Most of us human beings spend a lot of time thinking about the past and the present,” said Jeff Coons, chief risk officer and director of institutional services at High Probability Advisors.

He said people hesitate to spend in a down market, but the potential returns are better.

“Markets are really driven by going forward — by the future. By the time we’re reacting to the news, whether it’s declaring a recession or an announcement of inflation that happened a year ago, all that is already pretty well understood by the markets and already reflected in prices. We need to understand the news is already embedded in what we’re seeing today.”

Joe Zappia, co-chief investment officer with LVW Advisors, said good investing starts with good planning toward a goal.

“The only way you increase the likelihood of failure is to actually abandon your plan,” he said.

Zappia acknowledged that advisors have to manage their clients’ emotions along with their portfolios. He’s not a psychologist, but he remembers some advice that one gave to him.

“When you make decisions, your head, your heart and your gut will need to be in alignment. If they’re not, then odds are there’s something about the decision that isn’t right. I think the same thing with your plan, your risk tolerance and the portfolio. All those three things need to be aligned or you won’t be able to stay the course.”

While investors want to live by the adage “buy low, sell high,” excitable ones may end up doing the opposite.

“Markets change, interest rate environments change, stock prices change,” he said. “But one thing that doesn’t change is human behavior.  So if we can help manage the behavior through our actions and the way we build portfolios then in the end, investors have better results in the long term.”

Megan Rinaudo, certified financial planner and partner with Thorley Wealth Management, said she knows that clients are emotionally invested.

“Seeing the value of their portfolio go down is upsetting and rightfully so, but that’s why working with a financial advisor to monitor your portfolio through an objective lens, helps to keep you on track.”

She said that, since 1980, the market has finished the year with negative returns only 10 times.

“It’s important to take a long-term look at investing and know that even though these are uncomfortable times, even though it’s challenging to watch your portfolio go down, just know that this is temporary. Unless you actually get out, we’ll be able to make it through this,” she said.

Rinaudo said she tells clients that “it’s not about timing the market, it’s time in the market.” She pointed out that long-term clients who ride out downtowns likely haven’t given up any principal. “They’ve only given up some of the gains. So, when they still see that their net positive, they’re usually pretty happy to see that.”

Even as they tell clients to trust the process and stay the course, advisors know some are antsy for action. To those who can’t sit still, advisors suggest:

• Follow your plan. If you don’t have one, talk with an advisor about developing a strategy to help you accomplish what you want. Have a plan that you can be comfortable with in tough times as well as good times.
• Update the plan as things such as changes in a job, housing or other major life events occur.
• Limit exposure to financial news. Trust your advisor is on top of anything that needs to be done.
• Don’t plan to change your plan based on headlines. Most news reports have buzzwords that trigger emotions. Recognize when you are reacting emotionally, because investors lose when they get out in a downturn and then get back in at higher prices.
• For investors with at least a 10-year horizon, stay invested and look for opportunities to buy into quality companies whose stock may be down as much as 30%.
• For investors who need liquidity, put an amount to cover two to three years of spending in cash or short-term interest-bearing instruments so you won’t be forced to sell if the market continues to go down.
• Re-evaluate your tolerance for risk and your capacity for risk. Both may change as you get closer to drawing on your investments for income.
• Stay diversified so you can take advantage of recoveries in various sectors.
• Rebalance your portfolio to keep the stock/bond mix that suits your goals. It’s a way to take control during turbulent times because it allows you to adjust to what the market is giving you so you stick to your strategy.

Patti Singer is a freelance writer in Rochester. Contact her at [email protected].