Investing in the Current Market: 10 Common Questions and Answers

With increased inflationary pressures, increases in interest rates, and talk of a slowing economy, we feel it would be helpful to review some key questions clients often have about investing in a turbulent market. Maintaining proper perspective can help us overcome any anxiety or discomfort we may feel and take a thoughtful approach to our investment decisions in the long run.

We’ve compiled our answers to ten common questions we’re fielding from our clients and our answers to each below – let’s dive in.

1. Will We Go Into a Recession?

This may be surprising to hear, but the answer is this: It doesn’t matter.

Recessions are historically hard to predict. We can’t predict when they will happen, how long they will last, nor how the market will respond. And since the market tends to anticipate things, the market may have already bottomed by the time we are in an official recession.

It doesn’t matter because we don’t know how things will respond. And therefore, any financial decision based on recessions is akin to speculating. Remember: Time in the market outperforms timing the market. Create a game plan and stick to it, regardless of anticipated market fluctuations.

2. What About Interest Rates Increasing?

Longer-term interest rates have gone up a lot this year already. Interest rates, like the stock market, are forward-looking. So even if the Fed increases short-term rates as they plan, that doesn’t mean long-term rates will continue higher – bond markets already have many interest rate movements in the price.

The reality is that the Fed is taking away the proverbial punch bowl. Things will tighten up. Maybe that will push us into a recession, maybe not. As I mentioned above, people cannot predict that, so it shouldn’t have any effect on your investing plan.

3. Why Are My Stock Values Going Down?

It’s important to remember that we own high-quality companies – we do not invest in the price movement of a stock, we invest in the underlying company. Day-to-day changes in the value of your accounts only reflect how people feel about the underlying stocks at any point in time – which is why they can fluctuate so vastly.

The market is a mood barometer.  Fluctuations in portfolio values do not represent a change in the quality of the companies you own, the dividends they pay, or their potential.

4. What if the Stock Market Goes Down More?

That is a possibility. If they go down substantially more, we will buy more high-quality stocks at a lower price. They’ll be on sale!

It can be painful to watch in the short term, but history has demonstrated that investors who stay the course and take advantage of stock market losses are rewarded in the long term.

Want to learn more about investing during turbulent times? Click here to see our webinar, “Our Brains, Mind Games & Investing.”

5. Is Marketing Volatility Going to Impact My Retirement?

It depends. If you are still many years away from retirement, what is happening in the markets today will likely have little impact on your retirement goals. We expect there to be ups and downs over the course of your retirement savings journey, so this is par for the course.

If you are already retired or are nearing retirement, the market downturn may have more of an effect on your retirement plans. In that case, remember that you have a few levers you can use to impact your ability to fund retirement, including:

  • Tightening your cash outflow so you’re not pulling from your investments while the markets are down
  • Adjusting your retirement date to bolster your savings
  • Delaying the date at which you will need to start pulling from your retirement savings
  • Delay some of your goals until the markets are back up

Of course, this is all dependent on your financial plan and how your investments fit into it. If you are worried about your retirement, schedule some time to meet with your advisor to discuss strategies.

6. Stocks Are on Sale?! Should I Put All My Money in Stocks?

A key part of our investment philosophy here at Clarity is that we don’t let market conditions drive asset allocation. Putting all your money in stocks could significantly change your asset allocation

Asset allocation is comprised of multiple factors, including risk profile, goals and timeline, all of which are integrated into your financial plan. That being said, if you have some spare dollars lying around that aren’t already earmarked for something else, now might be a good time to add them to your investment portfolio.

7. This All Feels too Risky. Can I Eliminate Risk?

Remember that there is no way to completely avoid risk. The key is to manage your risk and focus on the part of risk that you can control.

For example, a diversified portfolio can help to mitigate many risks that accompany investing. What that means is that you invest in a variety of asset types – if one goes down, the others balance out the loss. 

8. Real Estate is More Tangible and Feels Safer. Should I Move My Investments to Real Estate?

We get it, the stock market is abstract especially when compared to something tangible like a house. But remember that your investment plan needs to be integrated into your financial life plan, which may or may not line up with buying property.

There are several characteristics of real estate that might negatively impact your financial plan including liquidity (real estate is not always easy to sell), diversification, risk, expected returns and upfront costs. Make sure you know how these factors impact your plan and whether or not it makes sense for you to invest in real estate before you make the jump.

9. My Neighbors are Moving their Money to [Insert Any Investment]. Should I Be Doing the Same?

Everyone’s financial plan is different, and although it may make sense for Mr. Jones to invest in X, that doesn’t necessarily mean it is a good investment for you. 

The same is true in the other direction: The investment that fits your plan may not make sense for their plan. Always take advice from neighbors, friends, colleagues, family members, and so on with caution.

10. Is There Anything I Can Do?

Yes! You’ve seen some ideas sprinkled throughout this very article (see number five again). Depending on your unique financial plan, now might be a good time to take advantage of tax loss/capital gains harvesting or even Roth conversions. Also keep in mind that the best thing to do right now might actually be nothing.

Your best bet is to connect with a financial advisor who’s familiar with your unique financial goals, life plans and risk tolerance. Together, you can build a plan to overcome market turbulence and reach your goals. 

Learn More with Clarity

Market fluctuations are tough. Clarity is here to help. Click here to learn more about our investment philosophy or to schedule a complimentary consultation today – we’d love to connect!

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