Read the exact email a financial planner sent his clients when the market dropped
- Eric Roberge, a certified financial planner, sent an email to 250 of his clients in early March as the stock market began to plummet, offering some advice.
- He reminded clients not to act on their emotions - making financial decisions based on fear is never wise.
- He also told clients to consider their time horizon. The goals they've set are long term, and history shows that the market always goes up if you can wait out the dips.
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Eric Roberge is a Certified Financial Planner and founder of Beyond Your Hammock (and a regular contributor to Business Insider). Earlier this month, when the markets began to quake, he sent out an email to 250 of his clients advising them on what to do as stocks plummeted.
Along with sticking to your investment strategy, Roberge told his clients to stay calm and avoid letting fear drive them to make decisions that could derail their future financial plans.
We're sharing his letter here in hopes that it might help you make decisions about your investments as we all watch the stock market continue its decline.
Here's what he wrote
It's been a strange week and a half in the financial markets, to say the least. Long story short, increasing panic about the coronavirus caused serious volatility in the market.
I completely understand if you're feeling uncertain, worried, or even fearful. There is nothing wrong with those emotions.
But during times like these, it's critical that we keep perspective, stay rational, and ground ourselves in reality (rather than getting wrapped up in the sensationalism of headlines and talking heads on TV).
This is not to minimize the potential risks of a contagious illness; this is not to say stick your head in the sand and ignore the world around you.
Feeling concerned about what's going on is normal and not a problem. What can pose a problem is acting on those emotions and deviating from the set course of action you have in place as part of your long-term plan.
Why you shouldn't let your emotions drive your decision making
Reacting emotionally right now could lead you to doing something irrational (and detrimental) to your long-term financial health and goals.
We set plans and strategies for a reason: so that we have something to ground ourselves with in times of uncertainty. Throwing your plan out the window right now because you're scared is like taking your life vest and flinging it as far from you as possible because you're worried about the ship sinking.
That would be silly and self-defeating, to say the least. So don't throw your carefully-designed financial plan away when you need it most.
Current market volatility is not fun to ride out. There's nothing to say that this coming week might get worse. But if you're investing for the long term, don't get pulled off track by the distractions of right now.
This week is a week. The long-term might mean we have 10, 20, or 30+ years to go. Things might continue to get scary before we're back to clear skies and sunshine again.
Experienced long-term investors know to expect this. Volatility, corrections, and even downturns or recessions are all normal parts of the investment experience.
The other thing we know? That markets are cyclical
Check out the chart below from A Wealth of Common Sense. Ben Carlson looked at every month since 1926 that experienced losses in the 8-9% range ... and then looked at the market returns one, three, and five years after those dips:
This shows that stocks were higher 59% of the time one year after experiencing that 8-9% loss. They were higher 82% of the time three and five years after, too.
What this reinforces is that you will improve your investment experience if you treat it like a long-term game.
Continue looking at the forest that is your entire time horizon of many decades rather than pressing your nose up against the tree of today and failing to see anything else but what's right in front of you.
Remember, the money in your investment portfolio isn't there because you need it tomorrow; it's there because it's working to build the wealth you need for years down the road.
Part of our planning process together is focusing on your cash and short-term needs first, and ensuring you have enough money set aside in low- or no-risk vehicles for those needs so you don't have to touch money invested in the market.
The bottom line is this: Yes, weeks like these can be uncomfortable, but you do not need to act on that discomfort.
We set strategic, evidence-based investment plans in advance precisely so that we have something to guide us through these periods of uncertainty and worry.
- Eric Roberge, CFP
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