Managing Investments During Recessions and Market Declines

Cary Stamp, leading financial advisor based in Jupiter, FL, shares his view on how individuals and families should approach investment management during recessions and market declines.




Hi, I’m Cary Stamp. I’ve gotten a lot of questions lately about what’s going on in the markets and what’s happening in the US economy. And I wanted to share a couple of thoughts because I believe that it’s going to be a long, hard slog and it’s not going to be a direct upward trajectory after everybody gets back to work.

So we’re cautious at Cary Stamp & Company. We’re not making major decisions. We’re not making rash decisions. But we are taking the long view that it’s going to take us some time for the economy and for the stock market to recover. There’s a lot of uncertainty going on right now. But one thing that you need to ask yourself is, do I have enough money in cash, short term investments or bonds to be able to get me through the next three to four years? If the answer is yes and the rest of your portfolio is primarily invested in equities, you should take some comfort that the average downturn in the equity markets last substantially less than three or four years. In fact, the longest recovery that we’ve had was in 2007 and it took four years to get back from the high to the low, back to the high again.

So, if you’re in a position where you can afford to wait out the next three or four years, don’t lose any sleep over what’s in your equity portfolio. But you should also know that if you don’t have that type of cash reserve or short term bond reserve, you need to be making some tough decisions right now about where your income’s going to come from, if you’re already retired. If you’re not retired, don’t stop investing. Continue to dollar cost average into your retirement accounts, into your 401k accounts, and to all of your other investment accounts as you’ve done in the past.

And if you have cash that’s just been sitting there for a long period of time because you’ve said to yourself, “I’m going to invest this cash when the market goes down”, I’m ringing the bell. Ding, ding, ding. The market has gone down. So you slowly start to move that cash into the equity markets. I’m not saying do it all at once. There will come a time when you might want to consider doing it all at once and that’ll be exactly at the moment where you think that the world is going to end. That’s always the best time to make investments. But we do it systematically, we try to remove the emotional decision making from the investment process and invest for the long term.

If you have questions about what to do or any of our strategies, please pick up the phone and call us. We’re happy to share, we’re happy to tell you what we believe is going on, and we’ll get through this time. We just need to do it using rational thinking and a long term perspective.

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