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Financial Advisor Q&A – Should You Ride the Storm Out?

Hurricanes are no joke. They are volatile and leave a path of destruction and devastation in their wake. So when it comes to advice about how to survive given two choices (riding the storm out or evacuating), evacuating to safety and then returning when it is all clear is the correct course.

When it comes to markets and your portfolio, however, when given the same two options (riding the storm out or evacuating), evacuating to safety is the wrong course of action. History shows that when markets inevitably give us volatile waters with which to navigate, that they ultimately recover losses pretty quickly on average:


As you will note from the chart above, the average market downturn is about 30% and the average breakeven is 1.7 years. Not to mention, with the rise in interest rates, bonds are actually yielding some return (close to 4%) now as well (even though we had to endure some pain to get there).

In the current market scenario, the downturn is here (about 20+% down in the S&P 500 and bonds being down about 15% in aggregate through 9 months), as the course with which history has provided, you do not want to miss the upturn by evacuating your portfolio.

When it comes to hurricanes – evacuate. When it comes to market downturns – ride the storm out.

 

Disclosure:
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by Efficient Advisors, LLC (“EA’) for Mark Lund, Mark is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Advisor, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Fiduciary Report. Cities served in Utah are: Salt Lake County, Utah County, Park City, Salt Lake City, Murray, West Jordan, Sandy, Draper, South Jordan, Provo, Orem, Lehi, Highland, Alpine, American Fork. The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

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