Don’t panic, review your portfolio and, if your stomach can handle it, consider buying more stocks. That’s what many financial advisors have been recommending to clients during the latest stock market plunge.
At its lowest point over the past week, the Dow Jones Industrial Average was down more than 1,000 points intraday on Monday, before recovering 80 percent of that daily decline. But even after the recovery, the Dow was off 8 percent for the week.
Advisors tell our sister site, ThinkAdvisor, that the decline was overdue.
“The market has needed a correction of 10 percent or more for some time,” says Bryan Beatty, an advisor at EBW Financial Planning, in Vienna, Virginia. “Traders have been looking for a correction to feel better about the continuation of the bull market longer term.”
Beatty is sharing that information with clients and looking at possibly rebalancing portfolios in the next few days because of “portfolio drifts” from original asset allocation percentages.
Advisors whom our sister site, ThinkAdvisor, spoke with, like Beatty, seem to be taking a proactive approach, calling or writing clients to calm any jittery nerves with some historical data.
Andrew Rice, vice president of Money Management Services in Birmingham, Alabama, says he’s been sending clients a bar chart from JPMorgan that shows that the S&P 500 has fallen an average 14.2 percent annually over the past 35 years but ended the year higher in 27, or 77 percent, of those years. He got a few concerned calls from clients on Friday but none on Monday.
Mary Brooks, a Raymond James advisor in Walnut Creek, California, and principal with Integré Wealth Management, spent the weekend reviewing clients’ portfolios and is calling clients this morning to review their allocations and where they place on the risk/return spectrum.
“If someone says I can’t take this volatility and I have too much in stocks, we need to find out what percentage of stocks they can hold and not panic.”
Then, Brooks says, she will selectively raise some cash from stock sales and eventually buy more bonds, but not right away unless investors are in a hurry.
“It’s a wonderful opportunity to see what you own — what’s strongest and what’s weakest. You don’t have to be in a hurry to buy.”
Vanguard, in a note it posted for ETF and fund investors, advises that investors who are comfortable with their investment plans stick with those plans, including regular investments through payroll deductions, automatic investment plans, or target-date funds. “Buying a fixed dollar amount on a regular schedule offers opportunities to buy low during market dips,” Vanguard notes. “Over time, regular contributions can help reduce the average price you pay for your fund shares.”