Weathering the Market Storms

5/3/2018 - By Chris Stennett, CFP®

Every year, from June to November, Florida residents experience “Hurricane Season.” This is the time of year when Atlantic waters warm, and severe weather systems develop quickly. Every hurricane season, experts warn residents of the dangers these storms produce and, over the years, we’ve seen first-hand their potential for devastation. So, every hurricane season, we prepare. We buy flashlights, water, batteries, and other supplies. We understand the risk of living in the Sunshine State, and we’re comfortable with it because we’ve prepared. Yet, when faced with the risk of storms in the stock markets, many Floridians fail to properly prepare their portfolio.

Working with clients as a Registered Investment Advisor in Florida, I’ve often compared the declines in the stock markets to hurricanes. Both develop quickly, create a noticeable impact, and leave those effected feeling uncertain. A market decline is a reality that many people have not properly accounted for as they try to grow their investments. But it’s something that can cause tremendous worry, especially for those near or in retirement.

When I was a kid I watched Gilligan’s Island re-runs during the summer. Part of the mystery and draw of that show was the idea that this unlikely group of people would have to figure out how to survive for many years when they only prepared for a short three-hour tour…a three-hour tour. I thought, “They should have known that something can always go wrong!”

Depending on where someone lives in Florida the chances of being affected by a hurricane vary from 10% (Jacksonville & Pensacola) to 15% (Miami). …But, the chances of that same Floridian experiencing at least 1 period of severe market volatility in their lives? 100%! So why then are Floridians doomsday hurricane preppers, but Gilligan investment managers? I think confidence has a lot to do with it.

Last year, when Hurricane Irma was closing in on Florida, my wife and I were glued to our local weather channels. We were unsure as to the path of the storm, and when it unexpectedly turned north, my city was put directly in the cross-hairs. We had just had our first child, and we were faced with an important decision: do we shelter in place or evacuate the state? We discussed our options, the potential risks for each, and decided to shelter in place. Our view: our home was newly constructed, situated far inland, and had hurricane windows. We even had a backup generator! To us, we felt that traveling out of state with a newborn (and pets) for an unknown amount of time was riskier than staying. We were confident in our decision and we planned accordingly.

Confidence is tied to knowledge. My family made a confident decision to stay because we had a good understanding of the risks and potential outcomes. But how can someone feel confident in meeting their investment outcomes if they don’t have knowledge of, or confidence in, their investment plan? My answer: don’t try to do it alone. Instead, partner with an advisor who will build a solid plan and provide education and guidance on your money, so when the next ‘market’ hurricane comes, you’ll be prepared.

If you have any questions, please email me or contact a member of the Saltmarsh Financial Advisors team.

About the Author | Chris Stennett, CFP®
Chris is a financial advisor and Certified Financial Planner™ for Saltmarsh Financial Advisors, LLC, an affiliate of Saltmarsh, Cleaveland & Gund. He serves individuals and organizations as a comprehensive financial planner and coordinator of investment activities. His areas of expertise include investment management, income planning, tax and estate planning, incapacity protection, and liability management.

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