When Fear Meets The Plan
In October, a small business owner contacted our team after a difficult stretch in the market and said he was ready to move everything to cash.
His portfolio had declined about 11% over five weeks, and a $2.3 million account was down roughly $250,000 on paper. Like many investors during periods of heightened volatility, he wanted to step aside and wait for conditions to improve. The impulse is understandable; however, it is often during these moments that long-term planning matters most.
We reviewed the financial plan instead.
He did not need those assets for another nine years. That time horizon was important. His allocation had been designed with the expectation that market declines would occur along the way, sometimes sharply and sometimes at uncomfortable times. While the decline was meaningful, it remained within the range the portfolio had been structured to withstand.
He stayed invested.
By the following spring, markets had recovered and the account had moved back above its starting point. Had he sold during the decline and waited for a more comfortable entry point, he likely would have missed the rebound and converted a temporary decline into a permanent loss. The challenge with market dislocations is that they often feel urgent in the moment, but the decision to exit can have lasting consequences.
The plan had already accounted for a decline of that size. The greater risk was not the market move itself, but the temptation to make a permanent decision in response to a temporary setback.
In that sense, the role of an advisor is not always to identify the right investment at the right time. Sometimes it is to help clients remain disciplined, preserve their long-term strategy, and avoid decisions that could undermine the outcome the plan was designed to achieve.
If you’d like to discuss how a disciplined investment plan can help you navigate periods of volatility, please reach out to our team. We’d be glad to have a conversation.
