Pandemics, changes in government leadership and policies, skyrocketing inflation and natural disasters. These are a handful of newsworthy events that can significantly impact markets and economies. Yet making financial decisions based on headlines may not always prove prudent.

Thinking about such situations, we recently asked James Herring (Vice President of CUSO Operations and Program Manager for RBFCU Investments Group) and Terence F. Powell, Jr., AIF^® (Investment Program Manager for RBFCU Investments Group) to share their insights on how to navigate economic change. According to them, learning how to manage emotions triggered by news events can become essential. A healthy perspective on it all can help, too.

Focus on your goals, not news headlines

History shows the market has its ups and downs, with downturns happening every few years. But often, when things look bleak, recovery lurks right around the corner. That’s why it can be wise to resist making repeated sudden — or wholly emotional — investing decisions.

“There is always something going on in the world that can affect the markets and, therefore, your portfolio,” said Powell. “It's not an effective asset management strategy to base decisions solely on current events — especially when the past shows that there will be a recovery and gains over time.”

Instead of panicking each time a bear market looms, Powell encourages investors to stay focused on individual goals, like sending kids to college or retiring in a good financial position. “Work with your financial advisor to select investment strategies and solutions that match your level of risk, too,” added Herring. “If you change your level of comfort, talk it over with them. They may be able to offer alternative product solutions or fresh perspectives.”

Stick to your plan (but plan for the unexpected!)

While it may seem important to be aware of changing economic dynamics, those shifts shouldn't drive your decisions. “Numbers go up and down. Recessions come and go. Learning to accept and make thoughtful adjustments is part of the ride,” said Herring.

In fact, economic changes are one of the biggest reasons for relying on comprehensive, long-term financial planning.¹ With a solid plan in place, any changes you feel compelled to make may be more likely to come from thoughtful, educated decisions rather than sheer panic, rumors or click-bait financial articles.

Remaining consistent with your financial plan, like contributing to your Individual Retirement Accounts (IRAs) or 403(b) plans and investing in the market, might give you more confidence over the long haul. “Fluctuations are inevitable. So stick to your plan, and gather resources that can help you accomplish your goals,” Herring said. “Don't let knee-jerk decisions derail them.”

At the same time, it’s also good to have savings in an emergency fund for anything unexpected that may occur. “Emergency funds can be a good way to shore up your confidence for the long-haul,” said Powell. “It’s a back-up plan, basically, should you experience a market-influenced dip in your portfolio. Having cash on hand in a simple savings account can provide peace of mind. And don’t forget to consider life and long-term care insurance in your portfolio. Putting those solutions in place can help you feel better about your family’s financial future, too. It’s all about diversifying that portfolio in ways that serve your unique objectives.”

Balance your portfolio and consider diversification

Herring and Powell agreed that your investment portfolio should both align with your goals and be diverse enough to help weather market volatility. “With a diverse portfolio, if one asset category doesn’t perform well for you,” said Herring, “then you might have a better return with another asset category. You can customize your strategy.”

And don’t forget to turn to your financial advisor if you’re feeling stressed out. “Financial advisors have access to complex and detailed information about companies and investment opportunities that allow for well-researched and well-thought-out investment decisions. They can be a fantastic resource,” said Powell.

While it might be unwise to obsessively check your investment balances, you still might need to occasionally rebalance your portfolio. “Ideally, you’ll want to review your portfolio on a regular interval, like every six or 12 months,” said Powell.

“Although you might rebalance things annually, I’d say that a bigger issue might be the need to make adjustments after a major change in your personal life — the arrival of a child, marriage, divorce, etcetera,” added Herring. “People worry about making changes to their investment plans when the market changes, sure, but I might argue that the more pressing concern is a failure by many to update documents and beneficiaries. That can tie into estate plans, of course. But it’s incredibly important to manage those details continuously, no matter what the economy is doing.”

The takeaway

Markets rise and fall. Having a financial advisor who understands your distinct goals can help you navigate those difficulties. Indeed, building trust with a financial advisor² may be key to knowing what to pay attention to — and what to ignore — as you manage your personal financial plan.

“Financial advisors are trained professionals. I know our team does the research and makes recommendations based on what might fit clients and their unique situations,” Powell said. “But there’s something more at play. It’s the relationship. Building a rapport with your financial advisor, letting them know where you might be shifting in priorities or risk tolerance levels … all of that can prove helpful.”

When it comes to your investment goals, RBFCU Investments Group offers the resources you need to help keep your plans on track — come bull or bear market.