Investing can be a rollercoaster, with highs and lows that test even the most seasoned investors.
It's natural to feel anxious when your investments start losing value.
However, it's important to understand that not all investment losses are cause for panic.
In fact, this is where the expertise of a financial advisor can be invaluable.
Let’s explore what you should do when you're losing money on investments and how your financial advisor plays a crucial role in managing the situation.
Assess the Situation
Stay Calm and Avoid Impulsive Decisions
The first step when you notice your investments are losing money is to remain calm.
Emotional decision-making can lead to rash actions, such as selling off assets at the worst possible time.
Your financial advisor can help you stay grounded by offering a clear, objective perspective.
Review Your Investment Strategy
Your financial advisor will help you review your current investment strategy to determine whether it still aligns with your long-term financial goals.
Market fluctuations are normal, and sometimes short-term losses are part of a well-thought-out strategy.
Understand the Market Conditions
Market downturns are often temporary, and understanding the broader economic context can provide peace of mind.
Your advisor can explain whether the losses are due to market volatility, economic cycles, or specific issues related to your investments.
Rebalance and Diversify
Rebalancing Your Portfolio
One of the key roles of a financial advisor is to regularly rebalance your investment portfolio.
This process involves adjusting the allocation of your assets to ensure they remain aligned with your risk tolerance and financial objectives.
During periods of loss, rebalancing can help mitigate risk and position your portfolio for recovery.
Diversification as a Safety Net
Diversifying your investments across different asset classes, industries, and geographic regions can reduce the impact of a downturn in any single area.
Your advisor can recommend diversification strategies to spread risk and potentially enhance returns.
Explore Tax-Loss Harvesting
Offset Gains with Losses
If you’re losing money on some investments, your financial advisor might suggest tax-loss harvesting.
This strategy involves selling underperforming investments to offset capital gains from other investments, thereby reducing your tax liability.
It's a way to make the most out of a challenging situation.
Stay Focused on Long-Term Goals
Revisiting Your Financial Plan
Your financial advisor will help you revisit your overall financial plan to ensure your long-term goals are still within reach.
Temporary losses may not significantly impact your ability to achieve key milestones if your plan is sound and flexible.
Patience and Perspective
Investing is a long-term endeavor, and market downturns are a normal part of the cycle.
Your advisor can help you maintain perspective, reminding you of your financial goals and the importance of patience during tough times.
Consider Adjustments or Hold Steady
Making Strategic Adjustments
If your advisor identifies that certain investments no longer align with your goals or the current market outlook, they may recommend adjustments to your portfolio.
This could involve reallocating funds to more stable or promising investments.
Knowing When to Hold Steady
Sometimes, the best course of action is to hold steady.
If your investment strategy is sound and your financial goals remain unchanged, riding out market volatility may be the wisest choice.
Your advisor can provide reassurance during these times, helping you stay focused on the long-term picture.
The Value of Professional Guidance
Expertise and Experience
A financial advisor brings expertise and experience that can be invaluable during periods of financial uncertainty.
They can offer tailored advice that considers your unique circumstances, risk tolerance, and financial objectives.
Personalized Support
Beyond just managing your investments, a financial advisor provides personalized support to help you navigate the emotional aspects of investing.
This guidance can be crucial in making informed decisions that align with your long-term goals.
Conclusion
Losing money on investments can be stressful, but it doesn't have to derail your financial plan.
By working closely with your financial advisor, you can assess the situation, make informed decisions, and stay focused on your long-term goals.
Remember, market downturns are often temporary, and with the right guidance, you can navigate these challenges and come out stronger on the other side.
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See our Find an Advisor page to connect with a financial advisor who can help you navigate market volatility and safeguard your financial future.
Contact us today to discuss how we can tailor a financial strategy to your needs and help you make informed decisions during uncertain times.