Mission Impossible2: Managing Market Volatility in Unpredictable Times

Mission Impossible2: Managing Market Volatility in Unpredictable Times

My father was always thinking – so he never tired of telling me, implying I should get on the ball.

If we went to the Boston Garden for a game, he knew secret places to park, a short cut past the old-time hotdog stand, the cheapest peanut vendor, the quickest route to our seats. Time wasting was for chumps.

Stuck in traffic, he knew alternate routes. Rained out at the beach, he’d find a gaming arcade or fun house – keep the ball rolling. If the car broke down or blew out a tire, he had all the right tools and spares in the trunk. He could avoid most jams or get out of one, quick. Dad never played the stock market, though, and I’m rather glad. I would have hated to see him disappointed.

The market knows no master. The wiliest players get harpooned; the coolest sharks get gigged. Stock-picking algorithms complex as the subatomic stew are beaten by dart-throwing monkeys. You play the odds, rack your brains or go with your gut and usually make a good living. But when markets are roiled as today, even wizardry won’t work. That doesn’t mean you don’t need a plan.

In a world where the stock market records its greatest single-day loss and then quickly registers an historic gain a few days later, business-as-usual won’t suffice. Consider the angles, develop alternatives, prepare to think on your feet – just like daddy-o. When markets roam off-map and your financial plan goes haywire, the best panic suppressive is a solid session of analysis and question-and-answer. The topic is the trend of your life and the very foundation of your financial plans.

For many individuals and businesses, the Covid-19 business is making a mess of cash flows. Let’s say you need to liquidate some shares – this may be necessary even if prices are down. Rather than simply bite the bullet, work out your plan. How will I eventually get these share back into my portfolio? What other assets could replace them and play a similar role in my financial plan in terms of growth potential, dividends or stability? Identify the market conditions where repurchase or replacement would be efficacious and then keep your eyes open.

In the short run, it makes sense to review your lifestyle, as judicious adjustments can create the surplus you’ll need for future asset purchases, or simply to live in parlous times if the crisis drags on.

One of our clients was complaining about being trapped at home by the crisis – her boredom is acute. She resides on a horse farm in rural New York and lives to ride, so we wondered a bit at her displeasure. Happily, she perked up when discussing the great savings that come with self-quarantine. No rich lunches or impulsive shopping, no nights at the MET, fine dining or dancing, major savings on gas, tolls and parking tickets – the way to New York is long. These saved expenses add up remarkably, our client reports. The silver lining of voluntary isolation should not be underestimated or go unexploited.

This Coronavirus crisis makes this prime time to examine risk appetite and the structure of your portfolio. How badly has market volatility unbalanced your assets? Is the trajectory of your financial plan wavering a bit or has it run straight off the rails? There’s nothing like wild-horse markets to reveal an unhealthy need for speedy earnings. Many portfolios will require rebalancing into a more shock-resistant form. Harsh reality is a stern teacher, but you’ll receive no better instruction.

For more information, please read:
Questions Every Investor Needs To Ask Themselves Right Now | A Wealth of Common Sense

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