By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management Advisor^SM
Accredited Investment Fiduciary®

When we meet with new and existing clients, two of the most significant questions that we ask are, “What is the most important thing I can help you with?”  and “What concerns do you have?”.  Lately, we’ve been hearing more anxiety about where we are in the current economic cycle and how investments are expected to react the next time that we experience a prolonged market downturn.  It’s not a matter of “if” the market is going to go down again, it’s a matter of when, how much and how long.  While we do not believe that a recession is likely to occur any time soon, we also believe that it’s not too early to start talking about reasonable expectations as to how your current investments may react in a downturn as well as measures that one can take to position their portfolios.

Market downturns affect investors differently and are not always bad, depending on your individual circumstances.  If you are dollar cost averaging into your portfolio, for example, making contributions into your 401(k) with every paycheck, you are buying at lower prices during periods of time that the market retreats.  If retirement is a long-term goal, you have many years to make up for losses in your portfolio.  If retirement is closer on your time horizon, you may consider differing your investment mix of your contributions versus the allocation of the money that is already in your account, rebalancing periodically.  If you are already retired though, significant market downturns are an entirely different concern.  You are no longer buying in to your portfolio, therefore market downturns do not present an opportunity for you.  Rather, if you are withdrawing regularly from your accounts while experiencing considerable market declines, your losses will compound.  This is where having an income strategy becomes important.

Different from a prolonged downturn, market volatility is normal, expected and unpredictable, even in bull markets.  It’s kind of like turbulence in an airplane.  It’s not comfortable, but it doesn’t necessarily mean that the plane is going down.  Volatility does not concern us, even for retired investors, like a prolonged market downturn does.  The sequence of returns for a retired investor matters as well, meaning, the closer to retirement that the downturn happens, the more it affects your portfolio’s long-term performance.

While we do not believe a prolonged market downturn is imminent, we do believe it is a prudent consideration if you are nearing the intended goals for your money, such as retirement.  As John F. Kennedy once said, “The time to fix the roof is when the sun is shining.”

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or [email protected].  www.SchulferAndAssociates.com

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for an individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.