Mid-Year Finance Review

  Now that the summer season is underway, many of us are deep in vacation mode, enjoying time spent with family and friends. While this is a great time to relax, it is important to remember that you should not completely dismiss your financial matters. We often tell our clients that they should consider reviewing their finances in detail at the beginning of the year, but a mid-year review can help you stay on track to meet your goals.
  If we reflect back on the markets in the beginning of the year or last summer, many of us remember the emotions, specifically fear, that hit the minds of many investors. When the market is volatile, it is easy to be nervous or worry about your financial future. While a mid-year review of your finances can be beneficial, it is important to stick to your long-term plan, and avoid making rash decisions about your investments.
  Last August, we saw a market correction, which was well overdue after the market’s 77-month bull-run, which began in March 2009, according to Standard & Poor’s. During this time, the market only fell into correction territory three times. The correction that occurred last August was the worst correction since 2008. The S&P 500 dropped over 10% in one week, causing many investors to panic. By October, however, the S&P 500 erased its losses, allowing most investors’ portfolios to recover. On average, a correction or pullback occurs every 16 months, according to Ned Davis Research, so I believe it is important to remind yourself that they are a normal part of the market cycle. The example of last summer’s correction is one of many examples throughout time of why I think investors should not sell at the first sign of challenges.
  If you look at a chart of any of the major U.S. indices from the end of the Great Recession until today, there are many ups and downs, but overall, the market went up significantly. During this time, there were several days that caused stress for some investors. However, if you look at it from a long-term historical point of view, selling at one of those dips would most likely cause an investor to miss out on long-term returns. I believe that it is very difficult to try to time the markets, what typically matters is your time spent in the markets.
  I have seen corrections come as a surprise to some investors, especially after getting used to the upward momentum in the markets for so many years. But it was only natural that it made investors nervous. After all, the thought of the market decline that led the Great Recession was, and is still on the minds of many investors.  I believe that it is important to remember that getting nervous over market swings is normal, but one of the biggest threats to a long-term investing strategy is panic. It is important to consider that you do not want to give up on your long-term plan to make yourself feel at ease in the short-term by selling your portfolio.
  Now that we are more than halfway through 2016, take a minute to think about how you have handled your emotions in regards to your finances. If you remained calm last summer and earlier this year, and rebalanced your portfolio, you are probably glad that you did. If you sold prematurely and lost money, however, let it be a lesson to make a plan about your financial future and how you will handle these going forward.
  Do not be afraid to ask for help or guidance with these matters if you feel like you have gone off track or if you have already made mistakes. Insist that your trusted advisors help you so that you can get a better understanding of your risk tolerance and how to plan for your long-term goals. If you don’t have a trusted advisor already, perhaps it is time to find one.
Article Provided by: Edward M. Penberthy is a Financial Advisor in Morgan Stanley’s Mount Laurel, NJ office. Although Fox, Penberthy & Dehn has compensated South Jersey Business People to have this article featured in its publications, this is not a solicitation nor intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC. Member SIPC.