Keeping Calm on the Roller Coaster Called Volatility

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Volatility in the Chinese market has triggered renewed concern over global economic strength. This in turn has pressed firmly on U.S. markets and developed international markets. The Shanghai Composite plunged 8.5% on (their) Monday August 24th. It must be noted that the Shanghai Composite had been up 54.6% for the year in June and is down now only 4.2% for the year. In a Wall Street Journal article on China, Lingling Wei and Mark Magnier wrote that one of the reasons markets have been so unnerved is that China?s economy remains something of a black box.

The increased volatility that we are witnessing (one client referred to it as a roller coaster) has come amidst what many feel have been relatively calm years in the market. Many of you are probably concerned about how the recent market changes might impact your wealth. Here at White Raven Financial, we remain vigilant and continue to monitor the U.S. and international markets and economics. We do not see a need to make portfolio adjustments at this time. We would like to highlight our firm’s philosophy:

  1. Focus on the Long Term

When there are big stock market ‘drops’ it can be scary and worrisome for some. But the portfolios we develop are appropriate to client’s individual retirement plans. The worry of outliving one’s wealth feels very real when viewing a portfolio at today’s value. Even for those who are several years or many years from retirement, the concerns can feel especially real when thinking back to the market in 2008. Russ Koesterich, CFA Global Chief Investment Strategist for BlackRock, said in his most recent blog on August 24th that they didn’t think this a prelude to another 2008-style cataclysm and that selling has restored value in some areas of the market. Maggie McGrath of Forbes wrote a telling article today titled “6 Reasons not to Panic about the Market?s Downturn: What Wall Street Experts are Saying“.

  1. In/Out of the Market is not Our Style

It would be great if we had a crystal ball; but we do not. We are not aware of any investor that has consistently timed the markets with success. The best path to success that we are aware of: staying invested through the bad times so that we’re there for the good times. We consider this to be the best strategic plan.

  1. Diversification is Key

The most important lesson that many learned from the last crisis was that diversification works. A good example of that could be taken from the market this year so far: In the first part of the year bond and some large dividend funds were doing quite poorly. Now we see the same funds providing a better return than the negative returns shown by the large indexes. Granted, this is a small time frame and we don’t know what next week or next month will bring but we do know that diversification is providing a much smoother ride.

We are you financial fiduciaries and we do not take our role lightly. We work to provide the highest standard of care that we know how. We are invested in the markets along with you. It is times like these that it is important to stay calm and focus on the big picture. Making a decision in the heat of a moment may not be the best choice for your overall retirement plan.

If you have any further concerns or questions, please do not hesitate to contact us.

Regards and thank you,

The Team at White Raven Financial