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Who Are You Going To Call?


The recent fluctuations in the major stock markets shouldn't prompt investors to make quick decisions. Instead, they're a reminder of the need for a well-informed approach to investing.

Fearful man

The stock market over the past few weeks has had some huge daily swings and unfortunately most into negative territory. What about the 1,000-point market drop at the opening bell in under 10 minutes that now infamous Monday morning of Aug. 27? Do you recall your visceral reaction bordering on nausea or did you shrug it off?

Fantasy vs. Reality

Having personally gone through a few market corrections over assorted decades and experiencing some different sleep patterns, the experiences are usually forgotten as the market always rediscovers its equilibrium and continually moves upward. Having said this, the sense of the unknown and what else can transpire remains unnerving. However, useful lessons learned have helped understand that market corrections are inevitable and there are practical applications that can help mitigate and minimize risk exposure.

The movies Ghostbusters and Back to the Future, though fictional, may allow investors an opportunity to take a look back at their investing past. What investment ghosts do you harbor or what if you were able to go back in time and make more appropriate or correct choices? Unfortunately, hindsight is 20/20! Behavioral investing studies delve into this and many other investing patterns individuals use when making decisions on how, where, what and with whom to invest. How do you qualify and then explain your decisions with what the market is expected to do versus what it actually does?

Case in point, an Exchange Traded Fund (ETF) utilizes a passive investing approach to track and not outperform a related index. ETFs have been used since the 1980s. ETFs are a grouping of closely related and cost-efficient funds that trade like stocks at lower overall cost versus similar actively managed stocks. Additionally, ETFs offer broader diversification compared to a single stock.

Unfortunately, the tumultuous tremors in the market recently showed many ETFs met with difficulty in transacting sales and worse obtaining accurate pricing information. According to the Aug. 25 Wall Street Journal article “Stock-Market Tumult Exposes Flaws in Modern Markets,” “Many traders reported difficulty buying and selling exchange-traded funds, a popular investment in which baskets of stocks and other assets are packaged to facilitate easy trading. Dozens of ETFs traded at sharp discounts to their net asset value—or their components’ worth—leading to outsize losses for investors who entered sell orders at the depth of the panic.”

Are you prepared?

The question that ultimately presents is what can an investor do to prevent these market gyrations and insulate their portfolios? The simple answer is maybe nothing can be done. However, existing proactive tactics can include knowing and understanding your goals and ultimate needs, diversification of assets, using market puts and calls, understanding asset correlations to each class and its represented benchmark, avoiding segment concentrations, and more.

Who is making the investment decisions?

An investor can always direct their own portfolio. By accessing a wealth of overwhelming resources and pundit advice, they have the ability to make their own predictions of expected market movements and decide on appropriate asset selections to fulfill their every whim. However, there are other options.

Robo advisors are becoming mainstream in the investing arena, with large companies offering these services. Not all are the same, so it is incumbent on the investor to fully understand the nuances of each platform and costs. According to Claire O’Hara of The Globe and Mail, “As the Dow Jones Industrial Average plunged more than 1,000 points shortly after the open and the TSX plunged deep into the red, online portfolio managers reassured clients via e-mail, text message and instant messaging.” But what if you wanted a live person to speak with vs. receiving texts and emails? Robo advisers were confronted with some challenges as Wall Street experienced wild swings. Although continuing to provide services, the reality of speaking with a live person was daunting to those who may not have been able to connect.

A commissioned sales representative who is not necessarily a fiduciary may render suitable advice, but there are reasons for caution. The sales representative's lack of knowledge of your ultimate goals for in the short, mid, and long term may prove detrimental to your overall goals. Some of these representatives are directed by their broker-dealers to suggest a certain investment which may not necessarily be in an investor’s best interest and worse associated with high sales fees.

Morningstar equity analyst Michael Wong says that investors should not underestimate the value of having a real human to talk to. Traditional financial advisors, he says, act like coaches to mediate the emotional impulses of investors when the market looks like it could crash.

Meeting and consulting with a professional financial advisor, i.e., Certified Financial Planner, allows for obtaining necessary and often important information from a client with the understanding of a client’s goals and time frame requirements. Hence developing a carefully crafted plan of action to be presented, explained and implemented. Markets go up and down for many reasons. However, prudent planning with diversification across asset classes, having realistic expectations over the long term and planning for short term needs should allow for market blips to be recognized, analyzed and watched but not necessarily reacted to in haste. Jeff Benjamin of Investment News stated, “Cool-headed advisers kept their clients focused on the long term by pointing out that the week-long pullback, as sharp as it has been, came in the wake of a seven-year bull market run.”

So, the question every investor needs to answer is who are they going to call? Perhaps that decision should be made before the next major market shift.

About the Author

H. William Wolfson, DC, MS, MPASSM, CFP® is a financial consultant and advisor. After passing the rigorous Certified Financial Planner™ examination, Dr. Wolfson obtained a Master of Science in Personal Financial Planning from the College for Financial Planning. He was subsequently awarded by the College a Master Planner Advanced StudiesSM. He is a member of the Financial Planning Association (FPA). Dr. Wolfson retired after 27 years of active practice. He may be contacted at

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