November2008
Charles Bennett Sachs, CFA, CFP®
Vice President/Wealth Manager
(305) 448-8882 ext: 236
CharlesSachs@EvenskyKatz.com
Managing the Stress of Today’s Markets
When the titanic sunk in 1912, it is said that it took a week for the news to make it to shore. Sometimes I wish market news also had a week’s delay. Instead, a good portion of the world’s population can’t escape the market updates from television, newspapers, internet, or right on their phone. As the access to news and information has become as ubiquitous as the air we breathe, so too has the increase in stress we all feel when markets behave the way they have in recent months.
One day we are depressed and want to sell everything we have, the next, we kick ourselves for not buying more before the run-up. Here are some ideas for helping you survive these schizophrenic markets:
- Plan - Having your money last you through your golden years require planning. With a one in four chance that you or your spouse will live until at least 95, life is a marathon not a sprint. Retirement planning specifically addresses the likelihood that your money will last throughout your life, and while far from an exact science, greatly assists in the decision making process. Take an active interest in creating and revisiting your plan.
- Prepare – Just as one does not know the severity of a hurricane in advance, we have no way of knowing how bad this financial storm may be. Therefore, just like a hurricane, it is prudent to prepare for the worst. Look to build up your emergency cash reserves, pay down debt, and perhaps sharpen your employment skill set. Establish a realistic budget and stick with it, making sure to pay yourself first by adding to retirement accounts for those still in the accumulation phase.
- Focus – There is an interesting correlation with retired folks and market anxiety and it is not just from those people that fear running out of money. We have seen plenty of clients that are set for life, yet agonize over market fluctuations. I am by no means downplaying such volatility, but it seems those occupied each day with work, volunteerism or other time absorbing activity don’t have nearly the time to be so upset with what’s going on in the market. Focus on living your life and having faith that we will get through this mess. Focus on things that you can control. By focusing on a longer-term horizon, one can put even this market down turn in perspective. In fact, since 1926 there has only been four seven-year periods where the market was not positive.
- Breathe - Before making a rash decision, stop, take several deep breaths and count to 10 (or maybe 100.)
Those in their 50’s and below should realize that they have many years ahead of them to ride out the ugliness of this storm. Those in their 60’s and above are often looking for some growth to be passed on to the next generations. We have had several conversations with clients who realized “their” pot of money was invested in less risky assets predominated by bonds, whereas the “kids or grandkid’s pot” was in more risky stock assets since their time horizons were likely 30 or more years.
So keep stress to a minimum, develop and stick to your plan, and then go golfing, fishing, or whatever your favorite hobby or pastime may be. Don’t worry, as there will be plenty of market news waiting for you when you return and you probably won’t have missed a whole lot.
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