As the American stock market began to take a nose dive in the latter part of February, in response to the COVID-19 pandemic, financial planners in Chatham County were encouraging their clients to hold steady to their long-term plans. Now that the markets have begun to rebound after reaching low points around March 23, they’re encouraging the same thing.
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As the American stock market began to take a nose dive in the latter part of February, in response to the COVID-19 pandemic, financial planners in Chatham County were encouraging their clients to hold steady to their long-term plans.
Now that the markets have begun to rebound after reaching low points around March 23, they’re encouraging the same thing.
“With the market decline, people will be tempted to change their investment strategies,” said Laura Clapp, an Edward Jones financial advisor in Siler City. “But they need to keep in mind that most of their financial goals, such as a comfortable retirement, are long-term in nature — a lot longer-term than the shelf life of the coronavirus. If investors have established a long-term strategy that’s appropriate for their needs, they should stick with it, no matter what today’s headlines are.”
Ben Birken, a Chatham resident who works for Woodward Financial Advisors in Chapel Hill, used an analogy to describe what he’s been advising his clients.
“If you think about a roller coaster, the worst thing you can do at the scariest part of a roller coaster ride is take off your harnesses and stand up,” Birken said. “Reacting on a panic mode when things are going poorly or things are going well typically doesn’t lead to good outcomes.”
So really, these advisors’ advice didn’t really change.
“That’s always our message, whether it’s short-term temporary decreases in value, which happen way more often in a year than people give credit to,” Birken said. “You just forget about it because over the course of a year things fade from memory.”
That’s it. No complex advice for selling off certain stocks, picking up new ones, rearranging some investments. Just stay the course.
Both Birken and Clapp said its important for investors to stay disciplined at a time where panic set in. Birken said the economic recession of 2007-2008 saw a greater drop in market value over time compared to now, but COVID-19 instituted a drop of more than 30 percent in a shorter period of time, and it spooked investors.
“What’s made it more impactful on people is how quickly it happened,” he said. “A 36 percent drop in the span of three weeks, it’s left a lot of people shocked and scared. It’s OK to feel scared but what you want to avoid is let that emotion ruin a good long-term investment plan.”
Clapp said she acknowledges emotions are “running high,” but responding with that emotion is poor judgment.
“While everyone’s top priority should be to protect themselves, their families and their communities, it’s still important not to lose sight of their financial well-being,” she said. “And for that, the best thing all of us can do is look past short-term downturns and maintain the discipline to keep investing in all types of markets.”
Looking ahead, Chuck Carrick, a Greensboro-based partner with DMJ Wealth Advisors, said his firm feels the market will balance out and optimism is not misplaced.
“As we monitor and evaluate the vast amount of daily coverage surrounding the crisis, we are optimistic that ‘social distancing’ efforts will ultimately prove effective,” Carrick said in a Friday update emailed to DMJ’s clients in Chatham County. “In addition, we believe the swift and committed stimulus measures announced by the Fed(eral Reserve) have been effective in reassuring investors that the liquidity and solvency concerns from a few weeks ago are reduced for the time being. Whether it is further deterioration in unemployment data or an unprecedented drop in corporate earnings, our advice to clients is that these are event-driven data points that should be short-lived. Analysts anticipate that the economy will come back online in the back half of 2020.”
This kind of back-and-forth in the market is to be expected, Birken said, so there’s no need to panic.
“There’s certainly an understandable unease and discomfort,” he said. “We know over time that volatility is the price we pay for long-term returns. It’s almost like your admission for the theme park of long-term returns on your money.”
Reporter Zachary Horner can be reached at firstname.lastname@example.org or on Twitter at @ZachHornerCNR.
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