The Nasdaq and Russell 2000 traded decisively in bear market territory and the SP500 briefly reached this level (20% down) last week before aggressively bouncing off its 200-week moving average (an important level that technicians use). For most of our clients this is something that we have been through before and can certainly expect to happen again in the future. Corrections and bear markets happen for a variety of reasons but always resolve to reach all-time highs at some point in the future, even with how uncomfortable they can feel at the time. Most of them we forget even happened.

We all want the benefit of having all the upside in the markets with little to no downside as our ‘tax’ paid on experiencing the long-term upside of the market. Investing is not necessarily about catching every percentage of upside or avoiding all the downside, it’s about figuring out what an investor truly wants and needs as it relates to market risk and volatility. Many advisors determine such risk by ‘qualifying’ this with the client – are you conservative, moderate, aggressive, or somewhere in between all of those? How do you know for sure? As a data driven firm, we utilize software with an algorithm that collects many data points on past performances for almost every security in the land and applies a quantifiable measure to that. When you combine a portfolio of these securities, the aggregated risk number can be found and then matched against a questionnaire that the client completes which runs them through theoretical up and down scenarios. We can set expectations with actual numbers, not guesses.

While many are feeling the effects of the market decline, there are few times to really ask yourself if this is a situation that you have a very hard time bearing, or perhaps if all of this gives you a bit more appetite to own more stocks and have an opportunity for longer term upside.

Like I mentioned before, we all love the feeling at all-time highs, but do we ever take a step back and think about where we may want to be in the future?

If you’d like to re-evaluate your appetite for market volatility (up and down), please reach out and I’d be happy to analyze this with you once again. Now is the time, not when we are feeling good again.