Mariner S. in Washington, DC. Eccles Federal Reserve Board Building
Sarah Silbiger | Reuters
While the market move is positive for investors, they are still dealing with a complex backdrop, which is likely to continue to drive asset prices going forward. Earlier this week, the S&P 500 fell into bear territory, meaning a 20% drop from its most recent high.
And, while the Fed is working to tackle inflation, there is still a lot of economic uncertainty ahead. This can cause a lot of stress for investors, even those with a long-term horizon.
“We’re certainly not immune to this,” said certified financial planner Brad Klontz, author of “Mind Over Money” and co-founder of the Financial Psychology Institute. He was speaking at the CNBC Financial Advisors Summit.
Manage investment stress
Instead of worrying about recent market moves, Klontz suggests looking at long-term performance to help ease nerves.
“When we become emotionally charged, we become rationally challenged,” Klontz said, adding that when this happens, people can make costly mistakes with their money. “We should be able to calm ourselves by widening that frame of reference in order to see things more clearly.”
Dan Egan, vice president of behavioral finance and investing at Betterment, agreed, noting that keeping an eye on future goals could help investors deal with stress in volatile markets.
“The focus on the future is very powerful,” he said at the summit.
To be sure, while the Fed’s actions are important, financial advisors and investors should not make any decisions with their money around the central bank alone, said summit attendee Douglas Bonparth, CFP and of Bon Fide Wealth in New York. The chairman said.
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“If you’re building financial plans around what the Fed is saying, I’m not sure you’re making solid financial plans,” he said, adding that financial advisors need to make sure their clients are big. understand the picture.
“It always comes down to helping people understand what they can’t control versus what they can do,” he said.
Still, if you’re noticing a decline in your portfolio and it’s keeping you up at night, it may be time to rebalance your portfolio, says Stacy Francis, CFP, president and CEO of Francis Financial in New York and a summit. According to the conference attendee.
“We need to put on a new pair of glasses and look at that portfolio and make sure the risk that is in it is justified,” she said.
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It is also important to manage investments to counter the impact of inflation on day-to-day expenses.
Francis said, “While interest rates are needed to cool the economy and reduce inflation, a further 75-basis-point increase in the future means debt is more expensive.”
This means that given the high prices for everyday items such as gasoline and food, people may struggle with debt to finance large expenses such as homes, cars and college.
Hopefully, people are taking preventive action to pay off debt and adjust their cash flows for the current environment, said CFP Lazzetta Rainey Braxton.
Braxton is Co-CEO and Senior Financial Planner at 2050 Wealth Partners in Brooklyn, New York.
If they didn’t, they would have to accept what’s happening now and make some compromises, she said. This includes potentially scaling up on lifestyle creep that can happen when times are better, potentially asking for a raise at work or even moving in with family or coping with higher housing prices. To do involves considering downsizing.
“There’s going to be some consolidation that happens with families,” she said. “Some are in survival mode; unfortunately, that’s how it is.”
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Disclosure: NBCUniversal and Comcast Ventures are investors chestnut,