“Be fearful when others are greedy and greedy only when others are fearful.”
Statistics show that trying to time the market by getting in at the bottom and exiting at the top is nearly impossible. For example, during the dot-com phenomenon, there was an abundance of emotional money chasing stock offerings that had almost no potential for success. When dot-com became “dot-gone,” wise investors got back in. There is never a “perfect” time to rejoin an investment, but with some financial wisdom, it is slightly more predictable.
This example clearly demonstrates how important it is for advisors to make sure their clients have developed a solid investment philosophy that ensures their money is invested in a risk profile that suits their unique situation. Clients should also have a well-defined investment horizon. Once both have been determined, your clients should not be fearful of the market’s unpredictable twists and turns.
As a trusted advisor, it is vital during this era of uncertainty and turbulence that you are proactive with clients and remind them of the investment decisions you worked out together.
One exception to the necessity of having your clients follow the risk-reward profile you initially mapped out with them would be if they are within five or so years of retirement. This is a critical time for investment results, so together you must reassess and recast your clients’ investment profiles.