While You Are Waiting

The market is down, but let’s keep some perspective. The U.S. stock market has delivered gains in 64 out of the last 94 years, dating back to 1928.  According to First Trust Advisors, during this time the average Bull Market period lasted 9.1 years with an average cumulative return of +480%, and the average Bear Market period lasted 1.4 years with an average cumulative loss of -41%. Given that since 1928 U.S. stocks have managed to be productive through 8 bear markets and 15 recessions, investors should confidently expect portfolio growth to resume – despite a 2022 year-to-date decline.

But our message is not about the resiliency of equities, nor is it about patience. Our message is that the direction of the financial markets is not the sole determinant to the success of your financial plan. Bull markets are fun and make wealth building easy, yet we encourage clients not to “coast” when asset prices rise. Portfolio appreciation alone will not create total financial security. Carl Icahn likes to say, “don’t confuse a bull market with brains.”  On the other hand, a bear market is no reason to become frozen – there are steps that you can take toward financial security while you are waiting for a recovery. Here are a few of our best ideas: 

Increase and pull forward savings:  As asset values decline, counter that with a higher savings rate – it is an overlooked remedy.  While market corrections are temporary, so too are the budget sacrifices that enable you to make this happen.  This recommendation is most easily applied to your 401(k) or 403(b) account, via the “out of sight, out of mind” ease of payroll deduction.  Additionally, if you can pull forward the savings that is planned, you will significantly improve your future returns by buying new shares while prices are low– rather than doing so after the recovery.  

Consider Roth conversions:  If the assets inside of your pretax retirement account have declined in value yet remain appropriate investments for your time horizon and risk tolerance, consider converting all or a portion into a Roth IRA; having the converted assets recover inside of a tax-free account may pay-off well.

Buy more Income:  With current yields rising on both fixed-income and equity holdings, prudent portfolio substitutions in favor of higher “distributable” income is both a portfolio pacifier and a wealth builder. 

Re-Balance your company-sponsored retirement plan portfolio:  As the market moves lower, move conservative or fixed-income assets, either modestly or aggressively depending on your age or risk tolerance, into growth and opportunity. Again, today’s pain is tomorrow’s gain – so be pro-active.


Organize your finances:

  1. improve access to and thoroughness of recordkeeping
  2. build retirement budget models
  3. review paystubs for potential savings on benefits
  4. consolidate duplicative investment and cash accounts
  5. consolidate consumer credit
  6. review all subscription-based fees
  7. review utility bills-energy use
  8. review property & casualty insurance coverage
  9. review household cyber-security measures.   


Audit your tax return:

  1. make sure that the inputs are accurate,
  2. review your rate of withholding or estimated payments
  3. re-check capital gains & dividends reporting
  4. look for additional deductions for the upcoming return.


Review your Trust & Estate Plan:

  1. review account registrations and beneficiary designations
  2. review ownership and inventory of personal property
  3. review your Will and any Trust document
  4. review the individuals who you have named as Trustees or Powers of Attorney
  5. review charitable intentions.

Extreme downside volatility, such as we have experienced in 2022, often causes us to become singly focused on that which over the short run we have less control. But if, while waiting for a recovery, we turn our attention to

the financial planning elements we can control, we will find the adjustments that collectively put us in a better financial condition.  Give us a call or set up an appointment to discuss how we can help you find higher ground.