facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Sorry - No Crystal Ball Here... Thumbnail

Sorry - No Crystal Ball Here...

We certainly could use a crystal ball right about now, but that’s not how this works. We aren’t in the business

of predicting the future. We are, however, in the business of making the best decisions possible with the most

information possible.

During these times when the market becomes even more unpredictable and uncomfortably volatile, one

might hear just about any advisor or financial “talking head” in the media urging investors to hold tight, do

nothing, and to not react out of emotion. While advice like that is certainly not incorrect in totality, it certainly

makes investors nervous at the thought of “doing nothing” while their portfolio is subject to the day-to-day

market volatility.

It’s generally sound advice to not react out of emotion – and this rings true for all things in life, not just

investing. Have you ever reacted to your own child out of emotion (or your own parent when you were a

child), and regretted your response just moments later? I surely have – and it becomes clear that emotion

often doesn’t help decision-making.

It’s also generally acceptable advice to “hold tight,” meaning BEFORE reacting, one should reassess the

landscape. Take time to review your current situation as it relates to the overall environment. This subtle

pause, you’ll find, is invaluable in keeping your own bearings in check. Be it public speaking, being put on the

spot by your boss with a problem at work, or even getting into a car accident – pause to assess, and then

formulate a plan for the next steps.

But what about “doing nothing?” That seems idiotic to let the stock market take 10 or 15 percent of value –

sometimes more – from your portfolio while doing nothing about it, right?! That’s why we thought it to be

prudent to show what happens on our end – the end of the advisor – in times like this.

Here is how we handle...

... emotion: discussion between each other, and amongst other financial advisors in our peer network. This

often leads us to reducing the noise that can be deafening during periods like this – almost to a paralyzing

degree. It’s not the end of the world, contrary to what the news might tell us, and in the history of stock

markets (including the Great Depression era), the markets historically make a come back eventually, and then

move further upward.

... holding tight: there is never a morning in which the stock market opens notably higher or lower, and we

make reactionary changes to portfolios. Why not? Well, when we research and define positions (stocks, funds,

etc.) that we will add or remove from portfolios, we have, during our research period and follow-on

monitoring, assessed that those positions possess relative strength when compared to competing sectors of

the market, or competing stocks / funds in the same sector. The positions we aim to invest in have shown

some degree of outperformance as they are compared to their peers and competition. Relative strength might

be displayed, in a growing market, with stock A was up 3.5% over a month, while stock B was positive 1.2%

over that same month – stock A is relatively stronger than stock B. In a down-market, like we are experiencing

now, stock A might be negative 4.8%, while stock B is negative 8.7%... again, stock A showing relative strength

in comparison.

...doing nothing: we don’t do this as advisors. While no action might be taken in one’s portfolio, our job during

these periods turns into one of assessing the investment landscape and discerning how the market has shifted

(if at all) to favor other areas of the market. After all, “the market” is simply a vague term to describe the stock

market exchanges (there’s a few in the US: S&P 500, NASDAQ, Dow Jones Industrial Average... plus more

across the globe). In practice, however, the market is often broken down into sectors (energy, information

technology, consumer goods) and further into industry groups (information technology further breaks down

to semiconductors, software, tech hardware, telecom). Our research and analysis goals are to explore what

areas of the market are falling, which are rising, and the potential costs (financial cost, opportunity cost, etc.)

of making changes in one’s portfolio.

During these periods, one of our main goals is ensuring our clients maintain the ability to meet their short-

term cash needs and maintain focus on mid- and long-term financial goals by aligning their portfolio to

compliment those goals. Short-term cash needs vary from client to client, depending on age, monthly cash

flow needs, and risk tolerance. Some clients may require only a small percentage of their portfolio in cash (1-

5%), while others would find it more appropriate to maintain 20% or more in cash to ensure their financial

needs can be met over the next 12-18 months regardless of market action.

What’s the key takeaway here? If the markets have you feeling uneasy, figure out what you can control. This

is most often going to be expenses, but certainly defining how much money you NEED to survive over the

course six, 12, or 18 months will enable you to maintain financial control of your life during these periods.

Things that you cannot control, like day-to-day market action, should be left alone and not dwelled upon.

While past market performance is not indicative of what will happen in the future, historical patterns tend to

project potential outcomes for the way ahead. So far, every down-market prior to 2022 has returned to

previous levels, and continued to rise higher. For now, focus on what you can control... and ignore the noise as

much as you can.

Securities offered through Granite Wealth Management, LLC- Member FINRA/SIPC Granite Wealth Management (GWM) is required by regulation to review and store both outgoing and incoming electronic correspondence. GWM may be required to produce e-mail records for the SEC or other regulators in a criminal investigation. E-mail transmission cannot be guaranteed to be secure, timely or error-free. GWM therefore recommends that you do not send confidential information to us via electronic mail, including account numbers, social security numbers or any personal identification numbers. This is not an offer, or solicitation of an offer to buy or sell any security investment or other product. Any information regarding specific investment products is subject to change without notice. Any review, forwarding, dissemination or other use of, or taking of any action in reliance upon this information by persons or entities other than the intended recipient is prohibited. If you received this in error, please contact the sender and delete the material from any computer on which it exists. This information is obtained from sources believed to be reliable; however, its accuracy or completeness is not guaranteed. Granite Wealth Management, LLC and its affiliates, employee and/or directors may have positions in these securities, and may as principal or agent, buy from or sell to customers. All securities are subject to price and yield change and subject to availability. If you do not wish to receive advertising messages from Granite Wealth Management, LLC, please write us at: Granite Wealth Management, LLC. 32 Court St Plymouth MA 02360.
***Third Party Research Disclaimer Notice***
The material provided in any research report distributed via this website, email, Instant Messaging or other electronic communication, is offered as a courtesy only and has been obtained from third party providers. Granite Wealth Management, LLC (“GWM”) has been advised by such providers that they believe such information to be reliable, but neither such providers nor GWM make any guarantee and hereby expressly disclaim any responsibilities for accuracy or completeness. The recipient of this information is particularly advised to review the disclaimer stated by the research provider in any such report. Granite Wealth Management, LLC, did not participate in the preparation of this research report and as such cannot and does not guarantee the adequacy, accuracy or completeness of any such information, or the suitability or profitability of any particular investment. This publication does not consider the specific investment objectives of a specific person or entity.
Schedule a Call