Any professional financial advisor values their clients and strives to understand and provide opportunities for them. They inquire about your life and ask questions to clarify any issue that may lead to dissatisfaction.
And when it’s about investments during a market downturn –their message is always not to panic. They also tend to counsel those with funds to go hunting while valuations are down and invest in performing stocks, so when the downturn elapse, their portfolio will be in good shape.
Bad Advice
Of course, there is also bad financial advice. Some may ask investors to go and cash out everything, until when the market gains stability. While those may seem like a good plan, it will lead to a massive loss in value.
One thing common with all this weird advice is that they always originate from the internet—mostly random people posing as financial advisors and experts, to gain a few clicks and views.
Nonetheless, no two investors can have the same combination of goals, income, tax obligations, career prospects, savings, real estate holdings, and more – and as such, blanket recommendations are dangerous. If an investor cashes out every time, there’s a market downturn, which could be the difference between retiring comfortably and not meeting your retirement goals.
I’m not saying general advice isn’t helpful. Of course, information like limiting your spending and drawing up a budget is beneficial. But when it comes to important investment decisions, there’s a need to get more targeted guidance.
Vast Differences, Similar Approaches
To illustrate the point, let’s look at the example of two investors. One is a 70 years old widow, retired and in good health, but there may be several medical issues to contend with as she ages. She draws income each month from a portfolio worth $5,000,000, which she intends to preserve to leave an inheritance for her children and grandchildren.
The other is a 35 years old man, who’s healthy and has an annual salary of $100,000. While he’s debt-free, he just started saving for retirement, and have only saved a little to his 401(k). Additionally, he’s getting married soon and plans to have a couple of kids.
These two individuals don’t have the same financial considerations, and a cash-only portfolio wouldn’t help them achieve their respective goals.
Basing on such general statements, investors like these two may cash out on their investment due to any slightest market downturn. Whereas they are in a position to remain committed to their investment strategy, and even become more aggressive as the current environment creates buying opportunities.
Bottom line
Be cautious with general statements. Don’t rely on online articles to make your investment decisions. Sleep on your investment decisions and, if possible, speak to a financial advisor to guide you in making the right choices.
