Haunted Headlines: What is scary in the minds of American investors?

September 26, 2019

October 31st, 2017 was our first Halloween in Montebello. It was a beautiful evening. Jennifer and I gave out candy to the scary ghost, zombies, Marvel heroes and villains. We also attended a neighbor’s pizza party in the Villaggio. What a great family friendly night in the neighborhood and look forward to another great Halloween this year! It got me wondering as we approach another candy-filled Halloween… What is scary in the minds of American investors?  

Beware of those scary financial headlines 

Let’s be clear they are legitimate concerns in the minds of investors. For instance, which way are interest rates going and how that might affect IRAs? Or what happens to a portfolio as trade tensions ratchet up or down? However, for investors with longer-term dispensations daily headlines are often distractions… 

"ARRAY OF THREATS STIR UP MARKETS." 

"STOCKS FALL, BONDS RALLY AMID NAFTA NEGOTIATIONS” 

“TROPICAL STORM THREATENS COAST" 

News headlines can often stir emotions that make people want to make a knee-jerk reaction with their financial strategy, which could negatively affect their returns over the long run.  

History has shown that acting upon market news can be detrimental to a retirement plan. A successful retirement is based upon a well-thought-out financial plan and having the discipline to stay with it — long-term. 

Studies have shown over a 20-year period, that staying with investments in several different asset classes and different asset allocations performed compared to the average investor. What is striking is that the average investor, over that 20-year period, just barely beat the rate of inflation. 

The lesson learned is that investors need to focus on their long-term goals and focus less on moving in and out of the market based on the latest news. If headlines show stocks sliding, here are three steps an investor can take, working with their financial advisor, to make the best investment decisions for their portfolios: 

Revisit why you are investing 

What are your goals and investment time frame for the funds invested? Are you investing for a large purchase — such as a new house, funding a child or grandchild's college fund — or investing for retirement? If your time frame is three years or less, consider investing in a more conservative portfolio that consists of short-term bonds or cash equivalents. However, if your time horizon is longer term, a well-diversified portfolio consisting of stocks and bonds may be the right move. 

Is your current asset allocation right for you? 

Your asset allocation should match your risk tolerance. For many investors, the first set when building a portfolio was to take a diversified approach and spread the assets among stocks, bonds, cash equivalents and other specialty assets. However, if your risk tolerance has changed, then maybe it's time to make changes to that portfolio. If your portfolio is well diversified, it may be better to leave it untouched. 

What is your overall financial plan? 

This includes all your expenses, income sources and investments. Determine if everything is still on track to meet your financial goals. Asset allocation is an important feature of an overall financial plan, and if one goal changes, then you need to consider making changes to how assets are allocated. 

The exception to this rule is when the news reports a congressional or legal change that has the potential to affect the performance of a portfolio on a permanent basis. For example, if a headline says, "Congress is eliminating estate taxes," this headline could affect individual portfolios that are constructed with estate objectives in mind. 

For most situations, if there isn’t a reason to adjust your portfolio to reflect a significant change in your financial goals, be wary of the emotions provoked by the headlines and leave your portfolio untouched. 

A savvy financial advisor won’t encourage you to make impulsive changes. Instead, they’ll go through the three steps listed above with you to determine actions that may best suit your portfolios as you work toward your goals. 

The above are not an “all inclusive” list of topics but instead conversation starters. If you have questions or would like to know more you can contact me Frederick D. Shows at (864) 520-5061 or Fredreick.Shows@GoodLifeFA.com our offices are located in downtown Greenville at 101 North Main Street Suite 805. You can also like us on Facebook at https://m.facebook.com/FrederickShows.GLFA/ 

Our website is http://www.goodlifeupstatesc.com/ or linkedin.com /in/frederick-d-shows-8431a1a7 

See you next month! 

Securities offered through LPL Financial, member FINRA/SIPC.  Investment advice offered through Good Life Advisors, LLC, a registered investment advisor. Good Life Financial Advisors, and Good Life Advisors, LLC are separate entities from LPL Financial. 

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

No strategy assures success or protects against loss. Investing involves risk including loss of principal.