Stay the Course
Discipline and levelheadedness help investors prevail amid the ups and downs of volatile times
by Jill Lupine

The 12 months collectively known as 2014 were marred by their fair share of global instability, terrorist attacks and other disturbing headlines that kept people up at night (keywords: ebola, the Islamic State, Ukraine, Malaysia Airlines, Ferguson, etc.). Such news inevitably influenced the manner in which many American investors managed their portfolios. But making undisciplined changes to one’s investment portfolio as a result of reacting to “whatever scares you,” in one financial professional’s words, can undermine a carefully architected financial plan. 

“Having a disciplined plan and sticking to it is best advice anyone can give,” says Ari Spectorman, a financial advisor with The Doylestown Private Wealth Group, a Doylestown-based affiliate of Ameriprise Financial.

Likewise, Brett J. Rhode, senior vice president of wealth management for UBS Financial Services Inc. in Conshohocken, believes investors should certainly be aware of world events. Fretting over how these events can affect markets, however, is not only unnecessary but also potentially harmful to one’s financial progress.

“Investors should stop worrying about what the markets are doing, and stop worrying about how their portfolio is performing if it’s not relative to their independent goal,” he says. “Don’t get so distracted by emerging markets or falling oil prices or terrorism or whatever scares you or excites you or whether your golf partner is making money in a particular stock. Focus on what you need to accomplish to meet your goals, then go do something fun and don’t worry about your money; know what’s happening, but don’t over-analyze and don’t be overly concerned about it. Let [a financial advisor] worry about it and update you.”

That said, the near future could present some significant investment challenges, according to Spectorman. He cites an anticipated end to the 30-plus-year bull market on bonds, which could ultimately yield lower returns.

“We can’t tell what happens in the next six months to a year, but we’re pretty confident that, in the next 10 years, asset returns should be lower than what they have been historically,” he says. “All your life and your parents’ lives, bonds gave you 5 percent to 8 percent a year, and the stock market needed to compensate for the extra risk [with higher returns]. Now, what if bonds gave you 1 percent to 3 percent and stocks were not be able to compensate? That’s why, when you’re working with an advisor, it’s essential to keep costs as low as possible.

“The U.S. is a happy place [for investing] right now,” he continues, “and the international markets are in an unhappy place: Europe is in fiscal trouble, teetering on the edge of recession; and in Asia, we’re hearing about China slowing down. Right now, the U.S. is the best game in town. … One of the most important things to understand, though, is the differentiation between the economy and the stock market, and they are not necessarily synchronized. The stock market has a way of being a forward-looking beast, telling you what’s going to happen. We have a strong bull market that some say started in May ’09, and we don’t know when it ends. Something like that is extremely hard to predict.”

Question marks aside, the Great Recession that began in 2008 is a distant memory, and investors have seen strong returns in the years since. Financial professionals expect continued positive growth in the United States, while global activity should stabilize.

“We still believe large-cap U.S. stocks offer reasonable value, and there’s potential for European stocks to perform well based on better growth prospects in Europe and low valuations,” says Andrew Nehrbas of The Nehrbas Group, a Bryn Mawr-based affiliate of Janney Montgomery Scott LLC. “We expect the Fed to slowly increase rates in the second half of 2015. While we do expect corrective bouts, we do not expect the long-lasting bull market to be disruptive in 2015.”

He believes it is critical for investors to create a financial plan with a trusted, qualified financial advisor and then review the plan with their advisor at least once a year to determine if any life-changing events warrant fine-tuning the plan. After all, a personalized financial plan can serve as a pillar to develop an appropriate long-term asset allocation plan, he suggests, while periodic market corrections should be looked at as opportunities to invest in one’s core holdings with any new cash. 

“Investors should seek an advisor who they genuinely like, trust and are comfortable working with,” says Nehrbas. “The advisor should have long-term experience over many market cycles to help guide them. Having the support of an experienced team and a firm with vast market resources is also critical in helping investors meet [their] goals.”

Spectorman suggests “solid credentials,” such as Certified Financial Professional status, can help determine an advisor’s qualifications, though he warns that “lots of obscure junk credentials” can obfuscate the search process.

“Chemistry and ‘warm and fuzzy’ are quite important, but you have to do your homework,” he says. “Someone can be very charismatic but not be on the straight and narrow, so you have to find a balance. … If you know someone who has had a good experience or if you have observed a colleague’s financial life from afar and you like what you see, that’s a much stronger introduction. You want someone who is going to offer ongoing holistic advice, who knows your goals and aspirations, but who also knows how everything should be allocated—tax planning, estate planning—so everything is in harmony.”

No matter who an investor relies upon to help reach his or her long-term investment goals, professionals suggest entering 2015 with a mix of caution and optimism.

“People are starting to let their guard down a little bit,” Rhode says. “Investors didn’t start putting money back into the stock market in any significant way until the end of 2012 and into 2013. While the economy looks good and the GDP numbers look good, I think … you have to say to yourself, six years into a bull market, should I be getting more aggressive or less aggressive? Should I be rebalancing? In the last five years we’ve had above-average gains, so maybe it’s a matter of playing a little more defensively now. Once you’re in retirement, you’re in the distribution phase, so you have to be diligent about where you are and what you spend, so maybe you take less risk and take a little off the table. You don’t need to be greedy; you just have to make sure that your money lasts a little longer than you do.

“The pain [of 2008] is behind us now,” he continues. “It will happen again. We don’t know when, but it will happen, so ask yourself the question: ‘How could it be bad to take a little less risk?’ … My job is to protect your money, not double your money, because when and if things change, it’s a whole different ballgame.”

Planning Ahead

With the start of a New Year, many investors decide to focus more intently on the future, financially speaking. The following locally based firms are staff with financial professionals who are devoted to helping their clients achieve their goals. Whether it’s to prepare for a comfortable retirement, fund the growth of a business or otherwise ensure a prosperous future, these organizations listed below can help you get to where you need to be.

BIRE Financial Services LLC
Plymouth Meeting

The Doylestown Private Wealth Group

Financial Coach
West Chester

Harvest Group Financial Services Corp.

Hoover Financial Advisors PC

Key Financial Inc.
West Chester

McNamara Financial Group

The Nehrbas Group of Janney Montgomery Scott LLC
Bryn Mawr

Penn Wealth Planning
New Hope

Royal Alliance Associates

Thrive Financial Services
Fort Washington

UBS Financial Services Inc.

Walden Capital Advisors
Bala Cynwyd

Wells Fargo Advisors LLC/Sean Newman

Wells Fargo Advisors LLC/Andrew Vitek