Owensboro financial advisors said Wednesday that people should keep their financial goals in mind while navigating the current downturn in financial markets, and that investors wary of risk should not make hasty decisions to sell stock while the market is low.
While investing in the market carries risk, people should stick with stock in quality companies that have a track record of strong performance. But the time to shift from stocks to bonds is when the market is high, not in a downtown.
Gordon Wilkerson, a certified financial planner with Baird, a wealth management firm, said periods of volatility are expected in the financial markets.
“When we work with a client, we talk about market risk. It’s real and it happens,” Wilkerson said Wednesday. “It’s certain there will be periods of uncertainty.”
Part of the financial planning is keeping focused on the client’s long-term goals and their cash needs, Wilkerson said.
“For a short amount of time we’ve seen the market drop,” Wilkerson said. “In most cases, we wouldn’t advise a change in course of action.
When a person plans to retire influences financial planning. “For most retirees, in most cases, we do not recommend they have (all) their investments in equities,” Wilkerson said. A portfolio for a retiree would include some equities, but also other assets with less risk, like cash and bonds, Wilkerson said.
As people approach retirement, “we are going to take steps” to build the client’s portfolio for retirement, he said. “We are going to pull back on the risk.”
For people in with a with equity investments, Wilkerson said it’s always good to have stock in tried-and-true companies that have been profitable over time.
“The market has shown consistently over time if we buy quality companies and hold on to them, we are going to be rewarded,” Wilkerson said.
Having a focus on financial goals will help clients and their advisors guide a client through market turbulence, Wilkerson said.
“If our goal is still to save for retirement or the children’s education … focus on that and make a decision based on that, and not on what the market is doing at a particular point,” Wilkerson said.
Jerry Goetz, president of Retirement and Financial Strategies, said Wednesday a correction in financial markets was expected. A correction is when stock indices like the Nasdaq, the Dow or the S&P 500 drops 10% or more from a recent high.
“We have for the last few months been preparing clients for the potential of a correction,” Goetz said. “We haven’t had one since 2023, and that’s abnormal.”
The Nasdaq fell to correction status on Tuesday, and the S&P 500 had lost 9% from its most recent high, verging on becoming a correction, Goetz said.
Goetz said, “We already look to have a diversified (portfolio) with stocks, bonds and cash.”
Goetz said he advises clients to have a reserve of funds on hand to cover 3 to 6 months of expenses.
A person relying on their investments for income should have at least three years of income in a “safer bucket” of more conservative holdings, like bonds, Goetz said.
For people with extra funds outside of their reserve, the downturn can be a time to buy stock, Goetz said.
“On market dips, what we’ve talked about to clients is to use it as an opportunity” if a person is looking to buy stock, Goetz said. A downturn in the market can be a time to “try to buy through it with extra cash,” he said.
People with many years before retirement should have more invested into stocks than bonds, Goetz said. But investors who are going to be anxious about the shifts in the market should also put part of their money into less risky investments like bonds.
“If they can’t handle the fluctuations in the market … maybe they should have some (funds) in conservative assets,” Goetz said.
A negative change in the markets can be scary, and Goetz said there are studies showing people who are risk-averse about investing are more likely to make poor decisions during a downturn, such as by selling when stock prices are low.
When making decisions such as selling stock to invest more in conservative assets like bonds, the time to do that is when the market is up, not down, Goetz said.
“We say, ‘even if you want to move more conservative, let’s do it when the market is good,’ ” Goetz said.
