Equity Markets Got You Down?

Lately all you hear television commentators talk about is the steep market decline. Whether you work with a financial advisor or not, if you are doing the right thing and you have the right investments, you shouldn’t panic. If you have been working with a CERTIFIED FINANCIAL PLANNER^® practitioner/Registered Investment Advisor to help you build a successful investment strategy, you should try to relax.

There is no one particular investment portfolio that is appropriate for all individual investors. You should own a diversified equity portfolio consistent with your risk tolerance and long-term investment objectives. The optimal portfolio will depend on the amount and timing of your cash flow needs, tax considerations and market conditions. Investment decisions should be based, therefore, on your specific objectives.

If your advisor developed an investment strategy that emphasizes diversified asset allocation, he or she most likely:

1) Completed a risk-profiling questionnaire to determine your specific asset allocation targets.

2) Analyzed your existing portfolio holdings against target allocations.

3) Created an Investment Plan based on Modern Portfolio Theory which outlined the strategy just right for you.

4) Analyzed your current mutual fund positions to reduce risk.

5) Implemented the target allocations around your existing holdings or with the addition of index mutual funds, exchange traded funds and actively managed mutual funds.

6) Designed an asset allocation strategy at the total market level or allocated to capitalization- and style-specific indexes.

One of the primary determinants of portfolio performance is the asset allocation decision. One of the most important duties of the Portfolio Strategist is executing the asset allocation strategy. Because the asset allocation decision is the primary determinant of portfolio performance, we have gone to great lengths in our firm to bring significant capability to this critical area of decision-making. When selecting Portfolio Strategists, our due diligence has focused on firms demonstrating:

1) Substantial research across global capital markets

2) Asset allocation and portfolio strategy as a core competency

3) Investment Policy Committees composed of senior investment professionals

4) A disciplined investment process

The Portfolio Strategists that we recommend at our firm, such as Goldman Sachs, Litman/Gregory, OAM Avatar, PanAgora, Standard & Poor’s, UBS and Wilshire, typically have minimum new account size requirements of $10,000,000 or more. Our clients have an exclusive opportunity to access this level of capability through our Asset Management Program with a minimum of $500,000 in assets under management.

However, there are many people out there who make their own investment decisions. Maybe they remember the last time the markets took a nosedive and the value of their portfolio went down with it. The worst thing they could do is panic and sell everything. Do you know anyone who is nervous about the fluctuations in the equity markets? If so, we know they are concerned. If you have a friend who has a hard time coping with market declines, one of the best things they could do is contact a local CFP^® practitioner/Registered Investment Advisor who can help them understand what is going on in the market. He or she will most likely schedule an appointment to meet with them to access their portfolio, ask questions about their goals, their current situation and whether there are specific issues that concern them.

I am very concerned for people when markets decline. It’s their money at risk. Many people are at an age where they may not be able to recover from a significant financial setback, so they have every right to be worried. If you know people in this situation, tell them to contact a qualified financial advisor. At times like this, it is most important for someone to listen to their concerns. Some people may have a lot they want to get off of their chest. And don’t panic the next time you hear television commentators speak of doom and gloom.