Investors in Missoula and around the world watch helplessly as their investment accounts plummet hundreds of points a day as markets react to global and national events.
KGVO reached out to Bob Seidenschwarz of SG Long in Missoula to make sense of what’s happening in the markets.
Seidenschwarz counted the factors that have paralyzed the markets over the past week.
“Here are the triggers, at least from a headline perspective, first; inflation,” Seidenschwarz said. “You have the Fed getting more hawkish, abandoning its bond buying program and actually discussing bond sales in the market. You also had some news with Russia and Ukraine, of course, and that stirs the pot a bit. And we are still dealing with the effects of the pandemic. So you’re pretty close to the perfect storm right now.
Seidenschwarz reiterated the advice he gives to every new client at the start of their investment journey.
“So, as I’ve said after decades of work, I stand by that statement,” he said. “You shouldn’t be in the markets unless you have longer time horizons, and that’s very important. You’re not entering the market to make a quick buck, to get a down payment on that house, or to take that vacation. Sometimes you can hit the right numbers, but you should really think about it over a period of five years or more because of exactly the type of events we’re going through right now.
Seidenschwarz explained the concept of “dollar cost averaging” when it comes to investing.
“It’s about a constant purchase of a specific dollar amount each month so that you suppress the ups and downs that the market inevitably tends to give you throughout the year,” he said. he declares. “So right now you’re putting that $100 aside every month, you’re buying more shares of that same fund which may be down 10-15% year-to-date compared to early January. That’s how you get discipline, and that’s one of the rules that has proven to be very true in the long run, and that’s how you win the game.
Seidenschwarz advises anyone interested in investing to take a very long view and not to overreact at times like these.
“It’s always important to assess your risk tolerance and how you’re allocated because these types of days will inevitably be part of your investing experience,” he said. “That way when I can tell a client ‘look, we’re positioned this way’, I checked their account and in their case it’s down 5-6% and the market is down 15% overall. That’s because we’ve discussed the specifics of their allocation versus being, say, 100% in equities, especially in certain sectors that are currently experiencing a downturn. It is therefore very important to have a pedagogical point of view on what could happen in what types of circumstances.
Seidenschwarz advises anyone to consult their investment advisor and get sound, reliable advice before reacting emotionally to current markets.