The stock market has had a rough couple of weeks, characterized by painful swings up and down and widespread investor fear. Added to recent market whiplash, caused by remarks such as those from former President Donald Trump, it has left investors scratching their heads. Financial advisors are increasingly playing an important role in reassuring nervous clients and providing useful advice amid the chaos.
The S&P 500, having hit an all-time high in mid-February, fell at least 10%. On Monday, the tech-heavy Nasdaq Composite fell 4%, its largest one-day percentage loss since September of 2022. The DJI wasn’t spared either, as it lost close to 900 points.
Stocks (NYSEARCA:SPY) further extended their decline early Tuesday on the heels of President Trump’s announcement that the U.S. would impose higher tariffs on Canadian steel and aluminum. With the pandemic causing markets to tank, many investors are still worried about their portfolios and what the future holds.
You're seeing the market more or less whiplash. - Douglas Boneparth
Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York, emphasized the importance of maintaining a long-term perspective. He further acknowledged that market volatility is normal, and long-term investors should experience these unavoidable ups and downs. Boneparth is a member of CNBC’s Financial Advisor Council.
Even in non-volatile times, Boneparth feels that all consumers, clients or otherwise, should have a cash buffer. Make it enough to cover six to nine months’ worth of living expenses. While many advisors recommend a three-to-six-month cushion, this provides a safety net for both emergencies and potential investment opportunities.
One potential "silver lining" to stock market dips is the opportunity to acquire quality companies or indices at discounted prices. A portion of those cash reserves could be strategically deployed to meet these opportunities.
Don't let your emotions wreck your investments. - CFP Ed Snyder
New data from J.P. Morgan Asset Management highlights why it’s so important to remain invested through down markets. Missing just the 20 best days in the market from January 1, 2003, through December 30, 2022 would have ruined your portfolio. Well, then you would have had your total returns slashed by over 50%!
