Top 4 Investment Strategy Considerations In A Down Market

Inflation fears, rather than the pandemic or the collapse of the housing market, drive this market downturn. Lingering supply chain issues and global shortages of grain, oil, and natural gas resulting from the war in Ukraine have driven the price of everything from food to fuel to their highest levels since the early 1980s. 

Anyone who cares about their hard-earned money and retirement savings has found 2022 to be a tough year. The losses you’ve taken this year may be fueling concerns that the investment strategy you’ve designed for your portfolio is not serving you well. Your financial needs might have become more complex due to a life-changing event. The big question is how do you navigate this bumpy market? 

To help you answer this question, I speak to investors like you to hear your concerns and connect with the expert financial advisors on the Wealthramp network on a daily basis. Many people invest on their own without professional help while others work with experienced advisors to co-develop strategies. Here are the top four considerations to get your investment strategy back on a winning track.

1. Truly diversify your portfolio 

Diversification wins the battle. The challenges are to understand if your portfolio is truly diversified and to avoid common mistakes in diversification. It’s hard to know how many different investments you should own to diversify your portfolio broadly enough to manage investment risk and respond in a smart way to changing economic and political conditions.

One answer is clear – chasing hot stocks, jumping on the meme craze, or letting your portfolio become concentrated with just a handful of stocks won’t yield the returns you expect. The right fiduciary financial advisor can review your current asset allocation and recommend ways to adjust and optimize your mix of asset classes to better align with your specific investment goals, time frame, and risk tolerance. 

2. Look for bargains and consider alternative investments 

Instead of focusing solely on large-cap stock market plays, you can invest in mid-, small-, and micro-cap stocks, and high-dividend-paying stocks that ease the pain of a dropping market. Working with a fiduciary financial advisor who is fee-only (meaning doesn't make money on commissions) gets you in touch with an expert on all types of investments and areas where you can find bargains that may boost your balance.

You might also consider alternative investments, which include real estate, real estate investment trusts (REITs), commodities, crypto, forex, private equity, art, wine, or crowdfunding. Many alternative investments have historically been inversely correlated with the broader market, netting investors a return during recessions and bear markets.

3. Reassess your situation and stress test your assumptions 

Ignoring reality and refusing to acknowledge change hurt an investment portfolio. What worked for you and your family last year may no longer have the power to propel you toward your financial goals. You’ll want to be sure that your plan aligns with your risk tolerance.

Will you be able to continue with your strategy if stock prices drop or if stocks stay in the bear market territory? Have you built enough liquidity into the plan so that you can stay invested and not sell when the market falls? An experienced fiduciary financial advisor can help you reassess your situation with a pair of fresh eyes and stress test your strategy.

4. Create a new plan with liquidity

Creating a new plan in conjunction with a trusted expert means you’ll feel more in control of your financial future. It doesn’t have to feel confining – in addition to the blue-chip standards you’ve been used to, there’s a world of potentially lucrative investment choices to gain the kind of diversification that leads to financial self-sufficiency.

You don’t have to forgo fun, either – if you want to time the market with stocks you fancy, set aside the part of your portfolio you want to actively manage on your own. For the rest, consider partnering with an experienced financial advisor. In all your investments, commit to the plan you build. Its success depends on continued commitment – not fleeting interest. You can collaborate with a financial advisor to co-develop a strategy you can stick with to increase the chance of having a successful investment plan that meets your financial goals.

Back on Track 

An experienced financial advisor can help you improve every aspect of your investment strategy: retirement, budgeting, tax planning, investing, diversification, and other specific interests. A fee-only, fiduciary financial advisor in the Wealthramp network can help you create a sound financial plan that you’ll execute on your own or collaborate with you by managing part of your investments – the choice is yours. I know from over 20 years of experience that finding a financial advisor you can trust can be overwhelming. That’s why I founded Wealthramp and personally vetted every advisor in the network. If you’re ready for your best advisor matches, you can get started now.

Pam Krueger is the founder and CEO of Wealthramp, a free adviser-matching platform that connects people with rigorously vetted and qualified fee-only financial advisers. She is also the creator and co-host of MoneyTrack on PBS and Friends Talk Money podcast for PBS Next Avenue.

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