The Stock Market is Dropping

Help Your Employees Avoid Common Mistakes

Submitted by Matthew Paulson, President/Advisor at Voyageur Capital Advisors

2021 marked an impressive year for the stock market, with the S&P 500 finishing up almost 29%. 2022 has been a not-so-friendly reminder that stocks also go down.

From an investing perspective, years like 2021 are easy. Money went in and then money went up. Everyone feels smart. It’s years like 2022 where people get into trouble. They either reallocate their 401k into whatever has the best performance numbers, or they “wait out” a downturn by moving everything to a money market fund. These types of decisions far too often negatively impact the long-term growth of an investment portfolio. 

Because investments tend to revert to the mean, chasing performance will frequently lead to disappointing results. Simply looking at past performance will do nothing to tell you what future results may look like. And continually chasing whatever has done the best may mean you end up buying high and selling low. 

For investors who are inclined to sell during downturns, their concern is more about what may happen, instead of what has happened. Most can tolerate watching their retirement account go down some, but as the account value sinks, a little voice starts to creep in, asking “what if this is the big one? Should I just get out until some of the uncertainty goes away?” 

Look at world events over the last 100 years and then look at how the stock market has done. The time to invest is often when things feel most uncertain. If you try to time it, you’ll likely get it wrong. 

As an employer, you can help. Your plan advisor should be your first point of contact to set this up. You may also want to revisit the investment menu and fees to make sure you’re fulfilling your fiduciary responsibility.

---

QUESTIONS? Our goal is to be your financial strategist, navigator and teacher. While you are busy living life and making it on work on a daily basis, we stand back and look at the big picture.  This means not only recommending adjustments or strategies to implement now, but also watching the road ahead and identifying potential opportunities to take advantage of, or pitfalls to avoid. 

www.voyageurcapital.com
[email protected]