Our Strategy in a Volatile Market
We understand that a volatile market—like the one we’re in at the time of publishing—creates a heavy dose of uncertainty and concern. No matter what brought you to this page, I want to thank you for the trust that you’ve placed in our firm and assure you that we are here for you.
Two Reasons for a Volatile Market: Inflation and Interest Rates
If looking at your retirement funds has caused your heart to sink, or you’re one of the thousands of people Googling “why is my 401k losing money right now 2022,” you’re not alone. Americans are wondering why the market is trending down and if the future they’ve been working toward is safe.
In my opinion, there are two key reasons we’re seeing this volatile market:
- Inflation is at a 40-year high
- We’ve seen two large interest rate increases in the last year
Number one has led to number two. The Fed is trying to curb inflation in an aggressive way by raising interest rates, and it’s really spooked the market. And inflation is really impacting families and how much money they can spend.
You may (understandably) be wondering what this means for your retirement and what we’re doing about it.
Principles of Investing That Set Beacon Apart
The message we want to send you right now is: Beacon has a volatility strategy in place, and we believe that our overall principles of investing are effective. Yes, even in a market like this. Here’s why:
If you’re with Beacon and you’re retired, you’ll probably have some of your money in a principle-protected bucket. This is one of our core strategies.
The money you have that is principle-protected during this volatile period is safe. It doesn’t matter what the market is doing because you haven’t lost anything from that portion of your money—and that’s a good thing.
Is your retirement safe in today’s market? Watch our latest webinar for free to find out.
Money in the Market
Back in February, we tweaked our approach to the money in your portfolio that is in the market. It became pretty clear to us at the end of 2021 that interest rates were going to be increasing more than what most people expected. So, we made a shift out of growth and tech funds and into value funds.
That’s not to say that we’ve eliminated volatility. Certainly, in markets like this, you are going to have volatility and we’re seeing that in our portfolios. But we think this shift has been a very prudent move.
If you look at the NASDAQ—which is tech and growth heavy—it’s down almost 30% as of publication.1 Whereas the S&P and Dow are down significantly less than the NASDAQ.
We offer some investments whose main purpose is to provide our clients income: in the form of monthly or quarterly dividends. These are structured medium-term notes.
While the share value may fluctuate with the underlying indexes they track—like the S&P 500—the dividends are uninterrupted until their barriers are breached at their corresponding maturity dates. In other words, unless the index (i.e. the market) drops below a certain percentage value on a certain date, their principal and dividend investment is secure; so long as the investor does not sell the shares prior to maturity.
Structured Notes carry market risk, liquidity risk, call risk, and credit and default risks for both issuers and underlying securities. Structured Notes are complex investments including valuation, payoff structure, and tax considerations. I know this sounds complicated, so if you have questions, your advisor will be happy to walk you through this.
Staying the Course
At Beacon, we believe the key is to not panic and to understand that this will pass. The market will find a bottom. There are always specific things we are looking for, and there will be opportunities that we will be able to take advantage of throughout the rest of this year.
How Is the Volatile Market Affecting Your Portfolio?
My biggest takeaway for you is that, here at Beacon, we’re confident that we have a good handle on what’s happening. But as always, if you have specific concerns or questions, please feel free to give one of our advisors a call: (615) 716-2061.
If you’re new here, we’d like to offer you a free Financial Plan Checkup. This no-obligation, comprehensive checkup will:
- Analyze your current risk level
- Uncover hidden fees in your portfolio
- Project your current income plan
- Identify gaps and opportunities
- And much more.
We’re here for you not just when everything is going up and things are good—but also when you’re wondering what the heck is going on in the market, and how it affects you personally.
To our clients, I just want to say, again, thank you so much for your trust in us. We appreciate you and your family. We wish you blessings. And as we move throughout this season together, please let us know how we can help you.
1 Bloomberg US. May 24, 2022. “NASDAQ Composite Index.” https://www.bloomberg.com/quote/CCMP:IND. Accessed May 24, 2022.