With the average American’s 401(k) losing more than $10,000 during the first few weeks of 2016, investors are understandably nervous.
Mark Fried, president of TFG Wealth Management in Newtown, has been counseling his clients on managing risk, preserving and growing assets, and planning their financial future for more than 20 years. Suburban Life asked him to share some of his thoughts on how to navigate such scary declines in the stock market.
How much credence should I give to the stories I’m reading in the mainstream media?
It is important to remember that the financial media is in the business of selling advertisements and entertaining its audience. Fear and speculation drives ratings. The truth is, nobody knows for certain what will happen next, but that never stopped the financial media from predicting a crash one day and a boom the next. Always be skeptical of what you read in the newspaper, hear on the radio or see on the TV.
Shouldn’t I be doing something?
No one made money during a panic in the market. Many investors feel that they must do something during times like these. Knee-jerk reactions can do more harm than good to a well-constructed financial plan. If the strategy behind how you invest your money is still valid, then doing nothing is a good thing. The problem is that many investors never took the time to create an investment strategy. Without a clearly defined investment strategy, like the kind we create for our clients, how can you expect to make money in good times or bad?
Why is it important to maintain a disciplined approach to investing no matter what the market conditions are?
The key to being successful in life and in investing is discipline. Discipline is easy when markets are going up. When your portfolio is increasing in value, your commitment to a prudent investment strategy is not tested. But when markets inevitably turn, which is part of the natural cycle of the markets, that’s when your discipline gets tested. Ask yourself these questions: “What is my investment strategy—my investment discipline?” and “Do I understand what is going on with my portfolio?” If you can’t answer these questions, then maybe it’s time to speak with a financial professional.
What does it mean to say “investing is a marathon and not a sprint”?
Long-term investing includes hundreds of one-day, one-week, one-quarter and one-year events that temporarily jolt the market in one direction or another. During a bear market, we can see temporary gains of 10 percent to 15 percent. In a bull market, we have seen pull backs of 10 percent to 15 percent. If you have a plan and understand how your investments will react in good markets and bad, it is much easier to keep these temporary events in perspective.
What is “recency bias” and why should I avoid it?
Recency bias is an emotional response that results from observing a recent experience and inferring that these results will have a greater impact than a longer term trend. We’re naturally wired to fall for this false impression. Recency bias is just one of many tricks we play on ourselves which leads to making potentially bad financial decisions.
What are the potential consequences of giving into panic?
There is an old expression: “Panic pays no premium.” A clearly defined investment strategy allows you to make good decisions during times of financial and economic uncertainty. You should be prepared to make minor adjustments to your overall strategy along the way but a long-term investment approach is the surest path to financial security. Remember: Don’t let emotion take over. A clear head and a clear plan is the best way to deal with the ups and downs of market uncertainty.
How is my current portfolio structured to accommodate market volatility?
The problem that many investors face today is that their investments have more risk, more volatility then they realize. Most investment portfolios follow the market regardless of how much diversification they claim to have. This is because the financial industry benefits from the ups and downs of the markets. But there is a better way to invest using low-volatility investment strategies. Not only does this help minimize the ups and downs of your investments but it also protects your investments in the long term. This is the strategy that we use and it allows us to make sure your money will last and provide income for retirement.
How does TFG Wealth management help families better manage their investments and retirees make the most out of their money?
TFG Wealth Management is a boutique financial planning and investment firm. We specialize in spending time to really get to know our clients first. Then we craft a financial and investment plan that will help them realize their personal and financial goals.
Money is a means to an end. If you want to make money for money’s sake, then we are not for you. But if you are a person that wants to make sure you and your family are well taken care of and that your money will be there when you need it, TFG Wealth Management can help you.
How do we do it? Most financial firms look to fit you into a box. Are you a conservative investor, a moderate investor or an aggressive investor? This completely ignores the reason you are saving and investing your money in the first place.
We use what is called a low-volatility investment strategy, which means we look to reduce ups and downs of your portfolio. It has been shown that this is a much better approach for retirees and individuals saving for retirement.
As an independent firm, we use what is called an open-source investment model. This means we are free to use any investment available based on the needs of our clients. Unfortunately, many large financial firms have financial arrangements with mutual fund companies and insurance companies called revenue-sharing agreements. This means that their brokers and advisors are encouraged and sometimes required to use these investments because they are what’s best for the brokerage firm, not what is best for you. This is called closed-source investing.
How can readers learn more about TFG Wealth Management?
Well, you can go to our website www.tfgwealth.com. You can call us to ask when our next seminar or college-sponsored course will be held in your area. You can request a copy of my interview on PBS about how to select a financial advisor by emailing us at info@tfgwealth.com. Of course, you can always call the office at 866-296-8156 and request an appointment with me.
TFG Wealth Management LLC
115 Pheasant Run, Suite 114
Newtown, PA 18940
866-296-8156
www.tfgwealth.com
Photograph by Lynn Goodwin/Photos by Lynn
