Stay In or Get Out? Financial Experts Weigh In

By Kristine Porcaro, Co-Founder & President; and Kerry Luria, Managing Director of Advisor Services, at Lexington Wealth Management

Recently the team at Brenda after Sixty asked us for 3 reasons why women aged 60+ should not get out of the market. And, they asked if a woman manages her own portfolio and/or money, how can she get good advice?

The decision to “get out of the market” should not be taken lightly. It’s important to consider why you invested in the market to begin with. Were you trying to achieve a specific goal, investing for your retirement, or needing to grow your money to help others – parents, children, charities? First, examine the reasons you’re in the market. Have conversations with the right people to evaluate your needs. You can then make an informed decision to stay invested, makes changes, or get out.

As women age, we struggle to achieve personal balance, maintain relationships and manage our own finances. We are under a lot of stress as we work to manage our careers, often care for children and/or aging parents, help in our communities and hopefully take care of ourselves. These are crazy days and trying to manage our own money, and maybe our parents’ money, can add even more responsibility to our already full plates. This responsibility feels even bigger when market volatility spikes and we see the numbers go down. This could make one feel that perhaps it would be best to just get out of the market and not worry about it. So, let’s highlight three reasons to stay invested and not be out of the markets.

1) “Time in” the market is more important than “timing” the market. While the short-term ups and downs of the stock market can leave you feeling queasy, over time, investors are rewarded by accepting that bumpy ride and staying invested. It is impossible to predict when the market will rise or fall and trying to time those moves can prove costly. In fact, looking back at the S&P 500 Index over the past 15 years, (12/31/04 – 12/31/19), if you missed the 10 best days in the market, you would have given up more than half of the market’s annual return! You would have seen your annualized total return drop to 4.13% from a possible 9.00% – just from missing 10 days!  (Source: Putnam Investments)

2) Market volatility is normal. This year’s market gyrations coupled with the uncertainty and unrest swirling around us has many wondering, do we stay, do we go??? We say stay. While unsettling, a 10% or greater market decline is fairly common in the context of longer-term market cycles.  Since 1950, the S&P 500 Index, on average, has dropped 5% 3 times a year, 10% every 16 months and 20% every 7 years. (Source: Fidelity Investments) Even with those dips, the S&P 500 Index has produced positive returns in 30 of the past 40 calendar years, despite an average intra-year decline of 13.8%. (Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management)  So, staying true to your carefully crafted plan is important if you want to reach your goals.

3) We are living longer and need more than just income from our money.  According to a recent CDC study, the average life expectancy for a 60 year-old woman living in the United States is 84.7.  (Source: Center for Disease Control) That means your money needs to support you for about 25 years. Given the Federal Reserve’s current zero-interest rate policy, 10-year US Treasury bonds are yielding < 0.70%. For most people, that will not be enough to pay the bills, maintain their lifestyle or protect their principal. While the stock market will likely remain volatile, if one can stay invested, it typically delivers higher returns. Over the past 60 years, the average annual return of the S&P 500 has been roughly 8%. So, as long as you are invested for the right reasons, and you are not losing sleep, rethink that urge to get out of the market.

As we age, we should be enjoying our lives and spending our time with people and activities we love. Rarely does this include managing investments. Often times our accounts get ignored and they’re not doing what we had hoped or needed them to. If worrying about investments doesn’t bring you joy, we suggest you get some help. You’re probably thinking, “Get help? What’s help?!” Yes, you’re probably used to doing everything on your own, but this is one area where it’s proven that getting help works! Dynamic planning, life planning, wealth planning – it’s important and it includes ways to create the personal balance necessary for women to prosper and feel at peace.

In our experience, creating a good support team as soon as possible is one of the most important keys to successfully glide through the various chapters of aging and deftly navigate the markets. Getting the right team in place goes from being important to being critical to a successful outcome. When building your support team, some of the most important members are a CPA/Tax Advisor, an estate planning attorney, and a financial advisor.

Finding a Financial Advisor

There are many flavors of financial advisors including investment advisor, investment manager, stockbroker, financial planner, life planner, wealth manager, etc. The differences are vast, from their expertise and experience, their focus on investments vs. planning, their approach to client service and relationships, to their compensation structure. Understanding their approach and scope of services is important. Can they help implement an effective investment strategy and do they have a willingness/ability to offer guidance through difficult, (often non-financial), situations women face as they age? 

Women who have gone through, are going through, or are facing life transitions often have a preference for working with a wealth manager – a financial advisor who acts as a “quarterback” to coordinate all the advisors on the team. According to the Family Wealth Advisor’s Council WoW Study, successful women chose a wealth manager over a stockbroker or investment manager 2 to 1. (Source: FWAC)

You can find local advisors from a Google search by typing words like Wealth Advisor, Wealth Manager, Registered Investment Advisor, or Independent Investment Advisor. You can search for a local fee-only advisor from the National Association of Professional Financial Advisors: www.napfa.org/find-an-advisor

You can also search for a local Certified Financial Planner based on area of focus with various compensation structures from the CFP website: www.letsmakeaplan.org/choose-a-cfp-professional/find-a-cfp-professional

Perhaps the best way to find an advisor is to ask other savvy, successful women you know whom they work with.  Good advice is out there and is always worth sharing!