For many of us, earning money has been one of our life’s primary intents. Money is a power we hold that gives us what we want and what we need. It helps us purchase things we want; it helps us settle debt, pay our bills and live a comfortable life. All in all, we want more ways to earn as much as we can.
Now there's a war going on, the market has gone haywire, and inflation rates are rising is though there is no tomorrow. In this situation, we wonder, can we still make more money in a market as volatile as this? The answer is yes. Even with the geopolitical tension, financial advisors are focusing their attention on building a better financial future for their clients.
Here are thoughts from seven financial advisors, relating to all the market’s twists and turns.
Laila Pence, named one of Forbes’ top advisors for 2022, said financial effects from geopolitical situations such as the Russia-Ukraine war don't last long, and these situations have only short-term pullbacks. Pence also said that geopolitical sell-offs typically are short-lived, with an average total return of 5% six months after the event and 9% a year later. She said she also is comforted by statements from President Joe Biden and other Western leaders assuring that the unrest will not spread beyond Ukraine.
Vance Barse, wealth strategist and founder of Your Dedicated Fiduciary, asks clients to be proactive in determining how they can benefit from current market conditions. He also advises that investors should consider taking new opportunities that may arise with the market's volatility. According to Barse, now is the right time to start investing in a retirement fund, especially in a Simplified Employee Pension individual retirement account. This is also an excellent time to think of converting traditional IRAs to Roth IRAs because, in a downturn market, the tax liability associated with the transfer could be reduced.
Converting to a Roth now can also free up money that can be invested in the account within a few months, Barse said. If the market continues to fluctuate, this could be a good time to invest the cash.
Nick Reilly, wealth advisor and founder of One Day Advice, said that geopolitical situations are one of the reasons why it is essential to have a diversified portfolio. Other than Russian EFTs, different stocks are still doing well and are investment worthy. No matter what, he said, in the end, it all boils down to why we have a diverse portfolio. We have domestic equities, fixed income and international stocks, both in the developing and new market worlds.
Reilly said clients also can invest in companies of all sizes worldwide as part of a diversified portfolio. No one knows what will happen next, he said, so trying to learn about and anticipate the subsequent events is anyone's next best bet.
Marianela Collado, CEO and senior wealth advisor at Tobias Financial Advisors, suggested that times like these are the best to rebalance portfolios. Due to this, she said, investors should start putting basic investing principles like buying low and selling high into practice. Roth conversion strategies work best when market values are low and there are lots of opportunities to grab in the market itself on the investment side.
Chris Zaccarelli, chief investment officer with Independent Advisor Alliance, said that now is the perfect time to check clients’ risk tolerance. Talking about the market's volatile nature and discussing the real-world stress of what's going on can test people's risk tolerance, he said. On one hand, these situations do provide some reassurance that the market will eventually balance out. On the flip side, it allows people to test how they might perform in a stressful situation.
Allan Small, a senior investment advisor at the Allan Small Financial Group with iA Private Wealth, divides his clientele into two groups: those who are worried about the situation in Ukraine and those who are thinking of using this situation as an investment opportunity.
Even before the war began, the market was on edge, he said. The S&P 500 dropped 10%, and the NASDAQ dropped 13%. Most people understand how the market works, he said, but how many religiously follow it? The markets are constantly changing. Clients plan on keeping aside money to invest later when the market is better, but what they don't see is that when the market is better, it is at its highest, and then they lose the opportunity to grow their money when the market is developing itself.
Small suggested that buying when the market dips is a good option only when you buy selective stocks, knowing that they will grow eventually. This means looking for companies that will surely provide quality earnings, such as Amazon and Goldman Sachs.
Joanne E. Burke, manager of client services with Birch Street Financial Advisors, reminded investors that they are here for the long haul. Historically, a market downturn has been an excellent time to rebalance portfolios and use long-term investment funds, she said. Even if there is some fluctuation in the days and weeks to come as this plays out, it is expected to be brief.
Because of the disruption in Russian supply, higher energy prices will impact inflation numbers, Burke said. Still, she added, the best strategy for diversifying portfolios is to keep an eye out for high-quality firms that generate significant free cash flow and/or dividend growth. Short-term spending funds should not be invested in the stock market because the market is still unpredictable and losing even the money needed for short-term expenses in this market is a bad idea.
In the end, these seven advisors are advising the most common term used in the market, "This too shall pass." No matter what the market is hit with, it will come back in due time. In this situation, having patience and making smart decisions are the best way to go. Moreover, patience and good decisions are prerequisites in the market's strategy planning. Everything is stressful and unpredictable with the war going on, so it's best to keep watch and see how everything pans out.
Lyle D. Solomon, J.D., has extensive legal experience as well as experience in consumer finance and writing. He currently is a principal attorney with the Oak View Law Group in Los Altos, Calif. Lyle may be contacted at [email protected].