If you’ve followed the news or checked your pensions or investments during a market downturn, you know how chaotic it can feel.
One moment everything seems fine, and the next you’re asking “What just happened?” The good news is stock market drops are normal, and financial advice can help turn them into chances for a better future. Let’s discuss how.
Market Dips Are Part of the Journey
Think of starting a long road trip. You hope for a smooth journey, but you should expect some bumps or detours along the way. Investing is the same:
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Regular Drops: Since 1926, U.S. equity markets have lost value about 25% of the time.
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Big Declines: “Bear markets” (drops of over 20%) don’t happen all the time, but they occur often enough that they should be part of your investment strategy.
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Recoveries: History shows that after a significant drop, markets usually bounce back, often even better than before.
If you invest yourself, scary headlines (“trade wars,” “pandemics,” or “global shocks”) can push you to make decisions based on feelings rather than facts. This can lead to unhelpful actions like selling when prices are low. A financial advisor can help you stay calm and follow your plan.
You Don’t Have to Weather the Storm Alone
Have you ever tried reading macroeconomic data to calm your nerves during a market crash? It can be boring. While facts and figures may lack excitement, the stories in the news can be compelling and stressful. This is where your advisor is helpful:
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Media Coach: It’s easy to get caught up in dramatic headlines. Your advisor helps you focus on long-term trends instead of sensational stories.
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Behavioural Support: Knowing that someone supports you with a plan for every potential outcome helps you avoid impulsive decisions when the news gets chaotic.
Personalising Your “Risk Thermostat”
People react differently to market changes. Some hardly notice a 10% drop; others worry over a 5% dip. Your advisor will:
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Understand Your Comfort Zone: A good advisor will go beyond simple quizzes, discuss real experiences, and consider your wider financial situation.
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Adjust Your Portfolio: If you were anxious during the downturn, you can look at reducing your equity exposure when markets have recovered. If you remained calm, you might take on more growth investments.
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Conduct Crisis Drills: A good advisor will practice “worst-case” scenarios together so you know how you would respond and make necessary adjustments before a real crisis happens.
Turning Downturns into Opportunities
Here’s the good news: lower prices can lead to better returns later if you keep your investments. A good advisor may help you in the following ways:
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Regular Investing: Regular contributions (like monthly transfers) let you buy more shares when prices are low, which is known as pound-cost averaging.
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Rebalance Smartly: When share prices drop, your investment mix might get out of balance. A good advisor will reset the mix to stick to your plan, buying low and selling high without you needing to do anything.
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Find Smart Adjustments: Whether it’s using tax-friendly strategies, exploring different investments, or increasing your emergency fund, a good advisor will recommend helpful changes that fit your goals.
A Partner for Life’s Big Moments
Life is unpredictable, whether it’s buying a home, changing jobs, paying for education, or planning for retirement. A financial advisor can help you by:
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Aligning Your Goals with your money: They combine your dreams, like family vacations, children’s education, or retirement plans, into a clear financial plan.
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Keeping You Steady: While the market fluctuates, they ensure you stay on track with your long-term goals, checking in regularly to avoid surprises.
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Adapting with You: As your life changes, like when your family grows or your priorities shift, your financial plan adjusts to keep you on the right path.
Investing isn’t about predicting every market change; it’s about being ready for them. A good financial advisor helps you understand what’s going on, make smart choices, and feel confident about your decisions.
If you’re fed up with market ups and downs and want a customized plan to ease your worries, you can schedule a free, no-obligation chat to see how we could help here. A guide on selecting a financial advisor is also available here.
The guide is for informational purposes only and is not a substitute for personalised financial advice. The content should not be relied upon in its entirety and shall not be deemed to be or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Individuals or companies should only act upon such information if they receive appropriate professional advice after thoroughly examining their particular situation. We cannot accept responsibility for any loss due to acts or omissions taken regarding the content. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. Levels and bases of, and reliefs from, taxation are subject to change, and their value depends on the individual circumstances of the investor. The value of your investments can go down and up, and you may get back less than you invested. Tax laws and allowances are subject to change, and readers should consult with a qualified advisor for the most current information.
