Yes, we know it’s been a very rough ride for many over these past 18 months or so. As investment advisors we understand and have shared the worry you have felt, and perhaps even a bit of the panic on certain days.  

Some may wonder why this has happened to them, especially if they are paying someone to help manage their financial situation. The answer is simple: Market risk is an inescapable part of the experience of investing. To varying degrees, risk is everywhere; advisors can only guide you through it, not protect you from it.

We don’t mean to minimize the emotions that have emerged during this market meltdown and subsequent recession. The world economy is in uncharted territory, and it’s been terrible to behold. But despite the relentless stream of bad news, it’s important to remember that historically our financial system has always found ways to recover. We also know that problems tend to present unique opportunities.

For our clients, here’s our take on the current market situation and what that could mean going forward. Here goes:

• While account values may be down, only those clients who sold and ran from the market have recognized losses. We urge them to reconsider.

• Those who maintain a diversification strategy generally experience paper losses much smaller than the overall stock market indices, even though diversification does not guarantee a profit or protect from a loss. Past performance does not guarantee future results.

• Those who stay in the market, despite the risk to their principal value, generally have the potential of earning a higher portfolio yield (from dividends and interest) than those investors who flee to cash.

• Those invested in the market are poised to participate in a possible market recovery.

• During the past six months or so the markets have presented some historically attractive stock prices.

For us, managing downside risk is just as important, perhaps more important, as managing upside returns. Our money management philosophy has long embraced a willingness to accept lower returns in exchange for lower risk.

If you have found the experience of the past 18 months overly worrisome, perhaps it’s time to re-examine your risk profile and consider a new investment strategy. That is an important part of what we can help you determine.