Dear Liz: Today’s stock market is one of the most volatile of all time. So many issues affect it, and there seems to be no end in sight to war in Ukraine, inflation, high fuel prices, the pandemic, China conflict concerns and more. Any one of these would cause the market pain, but together it’s scary. I have a broker who’s used to riding ups and downs, and says to me to be patient. In the meantime I’ve lost 25% of a portfolio that was extremely fruitful until January of this year. Please give me guidance on working with a broker, finding one who knows how to navigate this market and isn’t mired in some tradition of riding waves. I need one who sees opportunity and knows how to take advantage and get out appropriately.
Answer: The reason your broker is “mired in some tradition of riding waves” is because that’s the one approach that consistently works. It’s the advisors who promise you that they can “see opportunity” and “get out appropriately” that can cost you big time. Advisors who try to time the market — which is what you’re asking them to do — inevitably fail. They might get out in time to avoid the crash but rebounds happen so swiftly that they’ll miss a good chunk of the recovery before they get back in.
There is no reward without risk, and riding out inevitable downturns is how investors get ahead over time. Trying to outsmart the market just leads to extra costs that lower your ultimate returns.