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The tragic events over the past few weeks in Ukraine have been heartbreaking to watch. While the world is on edge due to this unnecessary violence and bloodshed, the market has been extremely volatile. Many investors are extremely nervous as they watch their investments decline in value. Are there strategies that you recommend to minimize the volatility in one’s portfolio or on managing risk in general? I’m sure I speak for many investors when I say that I can’t afford to lose my nest egg. Thank you.

Shelly P. Blumenfeld
Teaneck, NJ



The situation in Ukraine, as with any tumultuous event, can be used as a time of introspection. This is true personally and from a financial perspective. A period of market volatility is a good time to review principles of risk and portfolio construction, and ensure you’ve implemented proper processes to manage your finances. That exercise will help you evaluate whether your nest egg is being invested appropriately.

Reassessing your need for risk: While stocks provide higher upside potential than bonds, they also tend to be much more volatile. Since Russia attacked Ukraine, the market has experienced wild daily swings. It has caused many investors to question why they own stocks in their portfolio in the first place. As one client asked me last week, “How can I afford to take risk with these assets if I need them for retirement?” The answer is that most people can’t afford not to take risk.

If you have ten or more years until retirement, you must have stock exposure within your portfolio. Seeing your portfolio drop meaningfully is an unpleasant experience. However, restricting your investing to high quality bonds will undoubtedly inhibit your ability to maintain buying power with inflation. The stock market, on the other hand, has historically outpaced inflation. In other words, you’d be setting yourself up to effectively lose money with inflation by not investing in the stock market. The fact that the market is going down does not change this need to take risk.

If you are approaching retirement or within the early stages of retirement, then maintaining some stock exposure is still important. It’s common for retirees to now live 20, 30, or even 40 years in retirement. In such a situation, you need to position your nest egg to grow so you don’t outlive your money.

Some investors are in a position where they have enough money to live the rest of their lives. In this scenario, an allocation to stocks is unnecessary. However, some stock exposure may be recommended if you’d like to leave a legacy to your family or to charity.

There is an important saying in the investment world: “If you’ve won the game, stop playing.” Meaning, if you have sufficient funds to achieve all your financial goals, then there is no reason to put that money at risk in the market. The current situation is a great opportunity for investors to reach out to their financial advisors to reassess their need to take risk and determine how much risk is appropriate to achieve their goals.

The importance of high-quality bonds: There are some investors who, on a high from years of attractive returns in the market, were caught off guard with the major market decline this year. That reinforces the importance of incorporating some high-quality bonds within your portfolio. Even if you are comfortable taking risk, few people can stomach watching their savings plummet in value. Utilizing bonds within one’s portfolio is a great way to dampen volatility and help investors ride out the market fluctuation. The ability to stick with a strategy for the long-term, and not sell in a panic, is one of the keys to investment success. Bonds can help you do that.

Implementing automation: Investors who have automated their savings into their portfolio are the best situated amid the turbulent markets and nerve-racking headlines.

For many investors, the big challenge is deciding when to add money to their investments. During the good times, people are always waiting for the market to drop to get more favorable prices. This leads people to wait for months, or even years, and can lead to missed opportunities. Conversely, when the market drops, many investors are understandably nervous and look for the market to “stabilize” before adding funds. Unfortunately, that also leads to continuous waiting and a missed buying opportunity.

One of the important axioms of personal finance is to never try to time the market. The best approach is to automate your savings, have money seamlessly going into your investment accounts with little to no effort on your part. If the market keeps going up, you will be buying. If the market drops, you will buy at discounted prices. While the news headlines are concerning, they should have no impact on your savings strategy.

It’s important to remember that this is not the first time that the world has been on edge. There was Pearl Harbor, the Suez Crisis, the Cuban missile crisis, the Six-Day War, Iraq’s invasion of Kuwait, 9/11, the Great Financial Crisis, and many more. In every perilous situation, over the long-term, good has prevailed and the markets have overcome any setback. The important thing for investors is to set up a sensible strategy from the onset and stick to it through the market turmoil. If history is any guide, this is the best way to navigate challenging markets.

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Jonathan I. Shenkman, AIF® is the President and Chief Investment Officer of ParkBridge Wealth Management. In this role he acts in a fiduciary capacity to help his clients achieve their financial goals. He publishes regularly in financial periodicals such as Barron’s, CNBC, Forbes, Kiplinger, and The Wall Street Journal. He also hosts numerous webinars on various wealth management topics. Jonathan lives in West Hempstead with his family. You can follow Jonathan on Twitter/YouTube/Instagram @JonathanOnMoney.