This as-told-to essay is based on a conversation with Kelsey Wilson, a 33-year-old financial advisor based in Los Angeles. It has been edited for length and clarity.
I officially started in the financial industry around 2014, but I had worked in the finance space before that in an externship, and I shadowed a few financial mentors while in college.
As a financial advisor and planner, I run BlackLines Financial. I work with business owners and high-net-worth clients, especially in the entertainment and tech sectors. Our core clients invest an average of $200,000 to $250,000, but we have clients who invest $500,000 or more.
My role involves researching the stock market and staying current on everything from taxes to investing. I then speak with my clients to understand their goals. From there, we build personalized financial plans, covering everything from how much to save to how much they should invest.
Since the stock market declined on April 3 and 4, the main concern I’m hearing right now is that people are seeing drops in their investment accounts and are worrying that they’ll never recover. They wonder if they should make changes to their investments.
I get it — it’s reactionary. Here are four things I’m telling my clients right now about their investments.
1. We planned for this
The No. 1 advice I give my clients is: We’ve planned for this. Your portfolio is intentionally built to withstand market downturns. If the market crashes or experiences volatility, we’ve already structured things to allow you to weather those storms.
Regarding investments, you mainly want to consider your time horizon or when you plan to use that money. If it’s a retirement account and you’re in your 30s, what’s happening with the market right now doesn’t make a big difference because you don’t need the money until 2050, and everything will be different.
Now, as they get closer to retirement, their portfolio should change, so they’ll become a bit more conservative. That way, if the market crashes like this one now, it won’t affect their portfolio as much.
For someone wondering how to be prepared for times like these, it’s all about ensuring your money is positioned based on your timeframe and what you need it for.
2. There’s no need to panic
Next, stay on course. Just like on a plane, turbulence can be scary, uncomfortable, and shaky, but the worst thing you can do is jump off.
The same is true with investments: when the market goes up and down, just know that’s part of flying on a plane. It’s normal to feel worried, but you don’t want to panic.
Essentially, when you’ve invested and the market crashes, you’re selling at a loss if you pull out. The best thing you can do is hold on to that investment.
We’ve had one client pull out and take money at a loss. We couldn’t talk them out of it. Luckily for them, we had multiple conversations, so they weren’t out of the market for too long and were able to mitigate their losses.
Typically, once you start drifting off, you’re essentially left behind — and the plane will leave without you.
3. Stay in the know
You should check your 401(k) balance just for educational purposes, but before you do that, it’s very important to understand how money works and be comfortable with it.
If you are uncomfortable with investing and it scares you, I would check it periodically, but not as much when down markets are happening.
If it feels like it will affect you too much to the point where you’ll make an irrational decision, I would advise you not to check it during those times if you know that emotionally, you’re hardwired to make an impulse decision.
4. Don’t get overly excited either
Unfortunately, when the market crashes, no one comes out and rings the bell to say, “Hey, we’re at the bottom, now is the perfect time to invest.” You don’t know when the top or the bottom is until years later.
For someone excited about the market being down, be cautious. Don’t think, Here’s my opportunity. I was planning to purchase a house next year, but I’ll use this money to invest instead. No.
Maintain your emergency funds, hold onto your money for your short-term goals, and don’t use the market’s downturn as a gambling strategy to make a quick buck. You don’t want to try to time the market, and you can’t.
Now, if you were planning to invest and were already putting the money in the market, it’s something to consider doing strategically.
It might feel scary right now but don’t panic.
