Market volatility has recently increased which should cause investors to call their investment advisors.
With the Dow fluctuating more than 300 points in the last few days, is it time to call your investment advisor? Almost half of wealthy investors indicate that “market swings” is one of the situations that would cause them to contact their investment advisors.
It’s interesting to note that in most cases, investors are more likely to reach out to their investment advisors in good times rather than bad. For example, 60 percent will call their investment advisor if they experience a financial windfall and half will call their investment advisor if they receive an inheritance. This is based on research conducted with more than 500 wealthy investors by Spectrem Millionaire Corner in the past few months.
Another reason to call an investment advisor is to gather information about topics such as changing tax laws (60 percent) or estate issues (45 percent). The financials winds are changing at the moment, including the upcoming changes by the Federal Reserve, a somewhat uncertain global economy and a slowly recovering economy....so why not call?
Is now an appropriate time to call an investment advisor? Yes. There are several factors at work in the current market that you should discuss with your advisor. In most cases, your advisor will have foreseen the changing market forces and you will find that your assets are properly allocated. There are, however, several questions you may want to talk to your advisor about.
-How much of your portfolio is invested in bonds and what is the duration of those bonds? The bond market is rapidly transforming itself and your advisor should be able to discuss with you why your current holdings are properly aligned to meet your long term interests.
-Discuss with your advisor your comfort level with your stock allocation. While many will indicate that the blips of the last few weeks are not relevant, others will tell you that the bull-run is over. Let your advisor know how you are feeling about the current market volatility and let him or her explain why your portfolio is currently properly allocated or whether it should be changed.
-Identify your cash needs. At the beginning of 2013, most investors with $500,000 to $1,000,000 were heavily concentrated in cash and cash equivalents, such as money market funds. Many have chosen to invest in the last few months. Determine your own cash needs in the near future. Did you invest more than you feel comfortable with or perhaps this could be an opportunity to buy? Determine your proper allocation with your investment advisor.
The market has experienced unprecedented highs in the last few months, however, the factors influencing the market are complicated. While often a market downturn indicates a recession, the current downturn is happening at a time when the economy seems to be growing, although at a snail’s pace. For both investors and their investment advisors, the current market environment is unlike any that may have existed in the past.
Is it time to contact your investment advisor? Yes, if you feel any level of discomfort with the current environment. Everyone needs to sleep well at night.
Catherine S. McBreen is President of Millionaire Corner. McBreen plans and develops content for Millionaire Corner. Catherine balances editorial content to meet the informational needs of both new and seasoned investors. She designs special monthly surveys on topical issues affecting the economic environment.
McBreen has a B.S. in speech communications from Northwestern University and a J.D. from DePail University College of Law. She is a member of the American Bar Association, the Illinois Bar Association, and the Chicago Bar Association.
Well-known for her expertise in the affluent and retirement arenas, McBreen is a frequent speaker at industry conferences. She has been quoted widely by the financial media, including The Financial Times, The Wall Street Journal, Research, Private Asset Management, On Wall Street, Reuters, Bloomberg News, The Dow Jones Newswires and Worth. Cathy has appeared as a guest on CNBC Closing Bell, First Business Morning News, Neal Cavuto at Fox Business News, ABC and CBS radio.
McBreen is co-author with Spectrem President George H. Walper, Jr. of the book "Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families" (Portfolio, January 2008)
Catherine is the mother of four and is involved in many school and community events.