As U.S. markets have experienced pronounced fluctuations this year, many investors have found themselves grappling with a range of emotions. The reactions have varied widely—from gasping at diminished balances to speed-dialing finance professionals, with some even opting to liquidate stocks when the market dipped, only to sell again when prices peaked. Finance professionals in San Diego have noticed this surge of anxiety among clients, with worries that retirement accounts might plummet to zero, that the current market scenario could lead to an all-encompassing crash, and questions surrounding the viability of ongoing savings efforts.
Amidst this turmoil, Lorenzo Sanchez, a partner at Pathview Wealth Advisors, has been guiding clients through their fears by encouraging a long-term perspective. He emphasizes the importance of not getting caught up in the day-to-day fluctuations of Wall Street. “Our philosophy is always — we call it — ‘Stay the course.’ And it means just focus on the long term,” Sanchez explains. He draws attention to historical market recoveries, noting that after a significant downturn earlier this year due to tariff announcements, the market rebounded quickly.
Professional advisors believe that the greatest threat isn’t the market’s volatility but the panic it induces among investors. Sanchez elaborates, “A lot of what we do is try and coach people through their emotions, and make sure they don’t make any drastic decisions in these times of panic, because that’s where investors really hurt themselves.”
In light of this, financial professionals have shared crucial advice for managing investments during periods of market instability. The primary takeaway from experts like Sanchez and two of his colleagues is the enduring value of sticking to a long-term investment strategy.
“Stay focused on the long term” was a sentiment echoed by multiple experts. Ammar Abuyousef, U.S. Bank’s market leader for San Diego, reinforced this notion by highlighting the importance of avoiding impulsive reactions that could derail long-term financial goals. Recent months have proven particularly challenging, with the stock market subject to wild swings driven by uncertainties surrounding economic policies, such as trade tariffs.
During periods of volatility, such as early April when client anxiety peaked, purchasers were advised against reacting hastily. Alex Murray, who oversees wealth management in San Diego and Orange County at BNY Wealth, pointed out that responding to market fluctuations can lead to missed opportunities during subsequent recoveries. For instance, the S&P 500 barely dipped 0.7% after tariffs were introduced, creating a scenario where emotional decision-making could have locked in significant losses for those who sold out.
Murray underscored how emotions can distort judgements during these tumultuous times. “If you had sold that first week of April, you would have locked in losses of 15 to 20%, and odds are you would have missed part of the recovery as well,” he cautioned. Finding conviction in one’s financial goals is essential to navigating these unpredictable market conditions.
Another vital strategy for investors is to minimize exposure to noise and negativity from financial news. Murray advises, “If you were to have gone on vacation and left your phone at home for the month of April, you would have come home and thought nothing really happened.” He advocates for tuning out excessive financial news consumption through various media outlets that can amplify anxiety.
Sanchez compared financial news channels to sports networks focusing exclusively on highlight reels, arguing that such programming attempts to sustain viewer engagement through sensational reporting. According to Sanchez, it is essential for individuals to reach out to their financial advisors during uncertain times instead of consuming an overwhelming amount of market news.
Moreover, both Murray and Sanchez highlight a silver lining to the current market volatility: opportunities for strategic investment. “The reality is volatility is not the worst thing that can happen; sometimes it creates new opportunities,” Murray explains.
For example, with market rebounds following significant downturns, some investors may feel compelled to capitalize on potential rallies. However, Sanchez emphasizes that timing the market generally holds minimal significance for long-term investors.
He suggests that downturns can serve as unique entry points for investments for those who are prepared to commit for an extended period. Sanchez stated, “These dips are entry points, but it should be entry points for assets you can leave for at least two years.” For long-term investors, the impact of minor market fluctuations on overall investment returns remains less significant compared to the benefits of patient and sustained investment.
Tax planning during a market downturn can also yield advantages, Sanchez noted. He discussed a strategy called tax loss harvesting, where investors sell positions that fall below a certain threshold to realize losses for tax benefits, allowing them to replace those positions while maintaining market exposure. Furthermore, downturns provide opportunities for Roth IRA conversions, allowing individuals to convert assets at lower values and reduce tax liability.
A key component of financial stability is understanding one’s risk tolerance and balancing investments appropriately. Abuyousef encourages clients to consider safer, more stable options during times of market uncertainty, like money markets or certificates of deposit. The challenge lies in balancing the instinctive desire to liquidate investments with the need to adhere to broader financial strategies.
Abuyousef suggests the most effective method is to maintain a diversified portfolio that accommodates individual financial goals, ensuring a balance of risk, returns, and liquidity during volatile periods. Additionally, establishing an emergency fund can enhance financial security. This fund should cover three to six months of living expenses, and Abuyousef emphasizes the importance of budgeting to improve overall financial management.
Sanchez notes that a generally applicable rule is to refrain from investing any funds intended for short-term needs in the stock market. “No money should be in the market that you think you will need in the next 18 to 24 months,” he insists. Allocating funds for emergencies, major purchases, or short-term goals should be kept separate from market exposure.
Reflecting on the 2008 financial crisis, Sanchez and Murray draw comparisons between then and today’s challenges. While the previous market turmoil was primarily due to systemic flaws within financial institutions, today’s volatility stems more from policy shifts rather than fundamental weaknesses among publicly traded companies. It serves as a reminder that poor investment decisions driven by panic can lead to long-term detriment.
Murray recalls stories of investors from the 2008 crisis who, upon going to cash during the downturn, were too fearful to reinvest once the market began to recover, causing them to miss out on growth in the intervening years. To avoid repeating such mistakes, both Sanchez and Murray advise sustained focus on long-term goals amidst the noise of the financial news cycle.
The key takeaway as investors navigate turbulent waters is to avoid panic-driven decisions and remember that the markets have historically rebounded. Sanchez concludes with a hopeful perspective, noting that the financial landscape can improve rapidly in the wake of volatility. “There’s always another downturn right around the corner, but for now it feels a little bit better,” he says, reflecting on the more recent market recovery.
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