Some of the Best Advice We Can Give You

Despite a few bumps in the road, the markets have been quite positive over the last twelve months. Since last September, the S&P 500 (a measure of the largest 500 publicly traded companies in the US) is up in value roughly 13%.

Predicting the future is a difficult endeavor, however, history and our experience tells us that part of investing means planning for the ups AND the downs.

Despite a few bumps in the road, the markets have been quite positive over the last twelve months. Since last September, the S&P 500 (a measure of the largest 500 publicly traded companies in the US) is up in value roughly 13%.

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Predicting the future is a difficult endeavor, however, history and our experience tells us that part of investing means planning for the ups AND the downs.How do we plan and prepare for a downturn? Stay calm and invest on.

"All financial success comes from acting on a plan. A lot of financial failure comes from reacting to the market." -Nick Murray

Let’s try an exercise. Consider how a market dip would feel now.

Let’s assume that in the next few weeks the S&P 500 index falls 10% (technically speaking, that would be a correction). When you hear the morning news, it’s nonstop about how badly the markets are doing. The media will be making wild comparisons to the big correction of 2008. What will you do?

(A) Call Charter Oak and immediately decrease your investments in stocks (the markets) in favor of the safety of cash and wait in hopes that you will know when to get back into the markets.

(B) Stay calm, a diversified portfolio designed according to your risk tolerance was built with these corrections in mind.

(C) Take that opportunity to rebalance (more on this later) and potentially take advantage of an opportunity.

Our advice is always tailored to the individual client. However, in a majority of cases our choice would will be (B) AND (C). Reacting to market draw-downs by moving to the safety of cash is like swerving your car after you have hit a pothole. It won’t help you change what has already occurred, and it’s likely to cause a new accident or a larger problem moving forward.

Nonetheless, your feeling to make a change is understandable. A sharp fall in stock prices is usually accompanied by scary news headlines and red numbers. Modern media wants clicks and attention and, unfortunately, fear sells.

It’s hard to stay calm. We feel it, too. But our advice is simple and straightforward: stay calm and stay the course. We knew there would be days like this, and we planned for it.

If you’re tempted to take action, remember that this is why you work with a trusted advisor; to help you and your investments plan for, and weather, market volatility. You are not in this alone.

Also remember that, as with many things in life, making decisions in the heat of the moment is probably not a good idea. When it comes to investing, it’s no different. The more you check your account balances, the more likely to you are to see losses and, subsequently, do something in reaction to a near-term correction. Reacting to market draw-downs is likely to hurt your returns over the long term.

What We Are Doing to Help You Reach Your Goals in Downturns

Tax Loss Harvesting may help you capture any losses in your portfolio and use them to help lower your tax bill at the end of the year. You can offset up to $3,000 of ordinary income every year with tax losses.

Rebalancing your portfolio. Your goals are tied to your investment portfolio, and each portfolio has its own target asset allocation. We monitor your allocations and rebalance when your allocation drifts outside thresholds, or when it appears to prudently add value. Rebalancing helps to maintain a simple discipline of buying low and selling high.

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." – Warren Buffett

Keeping your goals on track. We revisit the goals you set to empower your financial future. Remember that the headline on television or on the internet does not necessary reflect the probability of success in your own financial plan. Properly diversified portfolios combined with a personalized financial plan are designed to weather storms.

We are mindful of how these events make you feel and it is our job to listen and share the perspective you need to help make the smart decisions with your money. These are just a few of our seven promises.

It is always our privilege and pleasure to help you.

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