facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast blog external search brokercheck brokercheck
%POST_TITLE% Thumbnail

Real Life Planning Podcast Episode 53: 8 Things You Can Do If You Are Worried About the Stock Market

Financial Planning

In Episode 53 of the Real Life Planning Podcast, Cynthia Meyer, CFA®, CFP®, ChFC®, takes a break from real estate investing topics to address a common concern - stock market volatility. With recent market swings making investors nervous, Cynthia shares eight practical steps you can take to check in on your investment strategy. Whether you’re saving for retirement, planning a major purchase, or simply want to make smarter investment decisions, this episode will help you navigate market uncertainty with a clear strategy.


"Volatility is normal in stock market investments.” - Cynthia Meyer

This week on Real Life Planning Podcast:


💡

 How should you measure your investment returns to avoid unnecessary stress? [00:02:02]

💡

 Why is now a good time to run a retirement projection? [00:04:28]

💡

 How can you reassess your risk tolerance during market volatility? [00:06:34]

💡

 When should you consider rebalancing your portfolio, and how does it help? [00:09:32]

💡

What role does diversification play in reducing investment risk? [00:16:04]





Takeaway Quotes:

" Sometimes the emotional turmoil of watching a portfolio be volatile when it doesn't really fit your personality can lead people to do the exact wrong thing at the wrong time.” - Cynthia Meyer

" Every bear market or recession brings opportunities, and having a written outline of your target investment strategy can help you decide how you will take advantage of those opportunities when they occur, if you have some cash available.” - Cynthia Meyer


Resources:

Connect with Real Life Planning:

About the Real Life Planning Podcast

Hosts Cynthia Meyer and Vekevia Tillman-Jones explore practical steps for real estate investors to build financial freedom and make working for someone else optional.


Episode 53 Transcript

[00:00:00] Cynthia Meyer: What are some things that you can do when you're worried about the stock market? On the Real Life Planning podcast today we're going to take a break from our typical topics of talking about real estate investing and real estate financial planning and we're going to talk a little bit about eight things that you can do when you're worried about the stock market.

[00:00:20] And why is that? Well, it has been a rough ride lately in the US markets. This is March 17th 2025 when I'm recording this video podcast and oh my gosh, over the past 10 market days or so, it, we haven't seen a correction correction in the US markets of about 10% up a little bit on the trading day on Friday but. Still in negative territory for the year. This has left investors, American investors feeling very jittery. Is this bull market that we've had since the end of 2023, as inflation came down, US stocks and the economy was booming. Things started to go up. We had a couple really good years. And is that bull run beginning to wind down? Are we starting to see the beginning of the next recession? Is there going to be a bear market? If so, what should you do to prepare? Whether this is normal volatility in a market that has some room to grow, or is the beginning of the next economic downturn?

[00:01:31] Recent events are a reminder that the financial markets don't go up in a straight line. Eventually, it could be sooner rather than later. I'm not sure. But eventually, we're going to have a bear market because that's how the business cycle works. Over my adult lifetime, I've seen plenty of market bubbles and busts and consider your worry about the stock market, that it's a sign to check in on your investments.

[00:02:02] So here are eight things that you can do if you are worried about the stock market and the first may be the hardest one and that's measure your returns from where you started and not from your highest balance. It's a really natural tendency to look at the highest number on your 401k statement or your brokerage statement, and feel like you lost money when the statement balance is lower than the highest number that you've ever seen.

[00:02:34] You may feel like you were counting on that sum of money and now it's not there anymore. And the fact is, unless you had sold your all of your investments at the exact moment when your balance was the highest, however, you would not have realized that gain. So, so why do I say that's the hardest thing to do is to measure your returns from where you started and often the highest balance? It's because a more realistic approach is to measure your success versus your goals. Has your account balance grown since you originally invested that money? And now if you've only invested starting recently, you probably haven't had enough time in the market to see any meaningful returns.

[00:03:19] You know, having investments in, particularly in stocks, we're talking about a time horizon that should be really long, maybe seven to 10 years minimum in order to fully see what you can do with that stock market investment. So has your account balance grown since you originally invested that money?

[00:03:38] Did you require a certain average in your rate of return? Has your balance grown by that return or that amount? If you need a certain amount to meet a certain goal, for example, to pay for a wedding or for the down payment on your next rental property, have you met those goals already? So measure from where you started, that I think is the most important thing.

[00:04:01] So also a question to ask yourself, are you trying to match or beat a benchmark? Many people are trying to come close to matching the S&P 500, for example, in their large cap growth investments. It's important to think about, again, measure your returns from where you started and not from your highest balance, and that one mind shift can make this a lot easier.   

[00:04:24] The second thing to do is to run a retirement projection.

[00:04:28] So for most of us, saving for retirement is the primary reason that we're investing in securities. And so, now while you're feeling worried, it's an excellent time to run an updated retirement calculator to see if you're on track and to check your progress. This is a goal that you'll be saving for a lifetime.

[00:04:47] And just checking the numbers to see how you're doing can be very reassuring. So given your savings and some reasonable projections about rates of return and inflation for example, you can check in on all of those things. So where can you do this? If you are working with a financial planner, obviously you can talk to your financial planner and say, Hey, let's just rerun some retirement numbers, given some information about the markets recently and about inflation and let's see where we are. Hopefully, that's something you're doing once a year anyway. If you haven't done in a while, check in with your planner and do this. Now, if you don't have a financial planner or you're not in a position to hire one, you should check with your 401k provider or your brokerage firm if you have one.

[00:05:31] They all have basic retirement projection calculators that are pretty easy to use, not as sophisticated as what a financial planner would have, but definitely good in a pinch. So use one of those retirement calculators and see if you're on track. You may also want to model those scenarios using different rates of return and different, again, different assumptions about inflation, just so you can look at it best in a worst case scenario.

[00:05:57] One thing I want you to consider when you're running a retirement projection, especially if you're doing it yourself, right, is it's better to use a conservative expected rate of return.

[00:06:10] Certainly don't use a return that's higher than the long-term average for the type of portfolio you're in. Let's say long-term growth, for example, or a moderate asset allocation. If your returns turn out to be better than the assumptions that you've used in your retirement account, you'll be happily surprised, but you'll be also appropriately prepared.

[00:06:34] The third thing to do, when you're worried about the stock market is to check your risk tolerance. People often think their risk tolerance is higher than it is. They think, oh, I can be 80%, for example, in my stock investments because I can handle it if the market goes down. But sometimes the emotional turmoil of watching a portfolio be volatile when it doesn't really fit your personality can lead people to do the exact wrong thing at the wrong time. So you do want to check in on your risk tolerance and again go to your 401k provider, go to your brokerage firm if you have a taxable brokerage account or an IRA and just retake their risk tolerance quiz and to see, okay, where am I really on my risk tolerance?

[00:07:29] Is my risk tolerance still what I think it is? And by risk, let's be clear. We all like risk on the upside, right? What I mean by risk is a risk of downside loss. And the other thing I want you to think about is to know the difference between risk and volatility.

[00:07:48] In portfolio management risk is typically measured by standard deviation. Remember that from math class. So the more spread out daily prices are from the average price, either higher or lower, the higher the standard deviation of an investment. Now, if it were just a problem on our high school math test it would be a lot easier to stomach the volatility, but it's your money, right? So when most people think about risk, they generally, they're really only thinking about the downside risk. The risk that an investment will fall in value. Maybe they will actually realize a loss and they won't be able to meet their goals. But just know that risk and return are related, right?

[00:08:29] If it's volatile on the downside, an investment is also going be volatile on the upside. And so when we have a year, like the S&P 500 was up with like 24% last year, right? It can also go down that much, right? Try putting a number on your risk tolerance. How much would you be willing to see your portfolio drop in the short run before you would run away and throw in the towel and run away?

[00:08:55] So let's say for example, you were saving $50,000 to take a sabbatical in a couple of years, and maybe you'd be willing to see that portfolio value drop in the short run to say $45,000, but not anymore than that. Or maybe you wouldn't be willing to see a drop below 50,000, for example.

[00:09:18] So those are good things to know to check in on. So you make sure that the types of investments that you have chosen match your ability to tolerate risk in that particular account.

[00:09:32] The fourth thing that you can do when you're worried about the stock market is rebalance your portfolio if needed. So what do I mean by rebalancing? Rebalancing is taking your portfolio mix of investments back to your target mix of investments, and this helps keep the level of risk in your portfolio stable by taking some profits from those investments that have done well and maybe have grown faster in value and buying more of the investment types that didn't grow as fast as or in value, or maybe they fell in value recently.

[00:10:07] So you can think about rebalancing as an activity that helps you buy low and sell higher. Once you've checked your risk tolerance and you've run projections, you've run those retirement projections to see if you're on track, you may or may not need to rebalance or make some changes in your investment mix and I'm not going this, certainly think about this as investor education. This is not personal advice. You've got to talk to your personal financial advisor or your 401k representative if you're thinking about rebalancing your portfolio. But here's just some general examples of when you might think about rebalancing or not rebalancing. If your current investment mix reflects your goals and your risk tolerance, remember, we want you to update your risk tolerance right now. Okay? You probably don't need to rebalance. For example, if you're planning to retire in 25 years and you have the goal left being, 75% of stocks and 25% of bonds, and you're regularly saving your retirement accounts, you're probably on track where you probably don't need to rebalance. You're just going keep saving more and hopefully dollar cost averaging it, meaning buying some more shares of the things that you like when the market is down a little bit, if there's volatility. If your investment mix is out of whack with your target mix, you may think about rebalancing, right? I've seen over the past couple of years that many investors are overweighted in the large cap growth area. That's been where the strongest market performance has been. And so, if you're overweighted a stock and underweight in bonds or overweighted in US and underweighted in international. You know that it may be time to think about rebalancing. Again, that's a personal decision for anybody who's listening. But lots of good tools that you can use in your brokerage firm or your 401k plan to figure out if you're going to rebalance back to your target mix. How can you do that? Now I want to say if you are within five years of retirement, one of the things that you may want to do if you are worried about market volatility, and as you get ready to glide path to becoming work optional, is to build up your cash position and consider building up a larger cash position maybe up to three years of anticipated investments in cash type investments. Savings, money, market funds, CDs, short-term bonds- that way if the markets are in a slump when you retire, you won't have to sell investments at a loss to pay your bills and you can wait for a market recovery.

[00:12:48] Now that by no means if you're a pre-retiree and you have a large portfolio, that does not mean you should necessarily, you should throw in the towel on everything. It just means that having some cash in the bank to pay your expenses for the early part of your retirement, whatever your social security and pension or what have you, doesn't pay, is going to help you ride out periods of market volatility so that you don't have to sell at the worst possible time. Now, this is a really good time to see a fee only financial planner. You are moving from a time in your life where you are- you may be, you may have been a DIY investor up until now, but it's a great time to check in with a financial planner and run some real numbers. Run a retirement budget and think about, what are some practical and pragmatic actions that you can take right now if you do think you need to rebalance and build those cash reserves. So, I'll put a link in the show notes here to an article that I wrote a while ago about four ways to rebalance your portfolio. So for rebalancing strategies, if you will, if that's something that interests you.   

[00:13:57] The fifth thing that you can do when you're worried about the stock market is to put together a simple investment policy statement to try and guide your actions. Now, you may have one of those already, and if you do, I think that's a wonderful, but if you don't have one, it may, you may be helpful to put together a brief written outline of your target investment strategy.

[00:14:21] Every bear market or recession brings opportunities, and having a written outline of your target investment strategy can help you decide how you will take advantage of those opportunities when they occur, if you have some cash available. Now an investment policy state or an IPS in financial jargon doesn't have to be fancy.

[00:14:46] It's just going to set some targets for the types of investments that you want to own over time. So not just stock and bonds, for example, and whether you're going to purchase those in mutual funds or ETFs or individually, but also your real estate investments. Any other business investments that you have.

[00:15:04] Some people have a tiny slice of crypto, hopefully not too much. And those are things that you, alternative investments like syndication or venture capital, things that you want to maintain over time in your- the real estate piece of your IPS, right? Like are you continuing to buy more rentals or investing or lending out as the mortgage lender, for example, or the hard money lender, like whatever it is that you're doing, set some parameters for it and put it in writing so that you have got a guideline for your rebalancing and you have some inspiration to see where there might be opportunities in the next bear market or recession.

[00:15:45] The sixth thing that you can do if you're worried about the stock market is to diversify. Now, are your investments as diversified as they could be? What do I mean by diversification? A mix of different types of investments so that the gains of some investments offset the losses of other investments.

[00:16:04] And what I like to say for our clients at Real Life Planning who are rental property business owners and they have securities investments, sometimes other business investments. They have investments that zig when the other kind of investment is zagging, right? And that helps to smooth out the volatility or downside risk of your total holdings.

[00:16:24] So, diversification reduces risk, although it doesn't eliminate it and different types of investments historically have delivered gains at different times. So, US stocks, international stocks for example, might be up at different times. Stocks in real estate might be up or down at different times. Stocks versus bond, for example. If you have a really plain vanilla portfolio and a lot of people have been really overweighted in one type of investment, consider the pros and cons of in incorporating different types of investments to reduce volatility. So, again, if it fits your risk tolerance, you want to incorporate some investments that are what we say in the financial biz, they're called non-correlating. What all that means is they zig when other parts of the stock market zag and those are things like real estate, commodities, hedge fund proxies, like market neutral funds or long short funds, et cetera can help reduce risk and smooth that returns in the right percentage. Now, if all this sounds like Greek or gobbledygook to you, again, great time to talk to a CERTIFIED FINANCIAL PLANNER™ or if you have a very large portfolio and you want some help managing it to somebody who has the Chartered Financial Analyst® certification, to think about like what is that investment policy statement that is going to diversify you completely.

[00:17:49] And then we talked about number seven, the seventh thing that you can do to when you're worried about the stock market. We talked about this in the context of being a pre-retiree, but really it applies to everyone build up your emergency cash. You may not know when the next recession will hit, but you can still be prepared where recessions don't just bring bear markets.

[00:18:11] So for sometimes some people, they also bring layoffs. If you have a business, they bring lower purchases from customers or a sales slump. If you have a short term rental that typically brings lower bookings, right? So at that time when you know the economy is shakier, right? If you have cash reserves to make sure you're not worrying about making your car payments and paying your grocery bills, that's obviously going to be the biggest piece of mind in that situation, so you won't have to worry until the market recovers.

[00:18:47] And then the eighth thing that you can do if you're worried about the stock market isn't for everyone. And that's if you have a very aggressive risk tolerance and a really long time until you need the money in your portfolio periods of high market volatility, also present some opportunities.

[00:19:07] Those opportunities are only for people that are comfortable with the financial equivalent of skydiving. There are lots of new ways to trade volatility. They are very risky; not for the average person. But if you are a sophisticated investor and you are DIY trader and you want to take advantage with a small amount of your total portfolio to try and take advantage of this market volatility. It's not for me. I wouldn't do it. I'm not a hands, I'm not that hands on, nor am I that aggressive personally. It's not something I do myself. But I do see some very risk seeking investors take advantage of that. Certainly a good idea to have in your mind as we talked about in the context of number five, the IPS.

[00:19:52] It's good to think about, oh gosh, what's going to be on sale if we have a recession? When do I want to buy the dip on a stock market, for example? Or the bond market. Is there a particular security or a business or a type of real estate that you're going to be looking, keeping your eye out for opportunities to use some of that cash that you have on the side to, to try and get it a little bit less expensively?

[00:20:19] I told you that in preparation for recording this call, I went and looked back at a column that I wrote from Forbes in 2018. It was in December of 2018. Just to put this in context, right? Since December of 2018 is the S&P 500 is more than doubled. So we've certainly had some periods in between 2018 and now we had the Covid recession.

[00:20:41] We had a little bit of a bear market in 2022. We had inflation that went up and came down. So we've had a lot of activities in between and in the long run, if you believe in the American economy in the long run, having a piece of that can be super helpful.

[00:20:58] Just to summarize, what are the eight things that you can do when you're worried about the stock market? One, measure returns from where you started, not from the highest balance.

[00:21:07] Two, run a retirement projection. This is something I want you to do now, and I want you to do it every year. Number three, check and recheck your risk tolerance. Make sure you know that difference between risk and volatility. Number four, rebalance your portfolio if it's needed, but only if it's needed. Number five, put together a simple investment policy statement. If you haven't done so already, that's going help you do number four, rebalancing. Six, diversify. If you are not as diversified as you can be, think about diversification or developing a plan to diversify over the next 12 to 18 months.

[00:21:48] Then number seven, build your emergency cash. We don't know when the next recession is going hit, but you can be prepared by having some cash on the side to pay your bills so you don't have to sell at the exact wrong time. And then number eight, if you're really a risk seeker with a high risk capacity, you may take advantage of some of that volatility and look for opportunities to buy.

[00:22:12] Those are eight great things that you can do when you're worried about the stock market. Volatility is normal. Even though we are living in some strange and crazy times with events in the news that are driving a lot of this volatility. Volatility is normal in stock market investment.

[00:22:31] Cynthia Meyer: So, we will see you next time. Thanks.

If you like this video podcast, consider joining Real Life Planning’s Question of the Week where our CERTIFIED FINANCIAL PLANNERs™ and rental property business owners answer the most common questions about real estate financial planning direct to your inbox.


This blog is for general financial education purposes. Information contained in this blog should not be construed as financial, tax, real estate, legal, or investment advice. For educational purposes, blog posts may contain links to other websites which are not under the control or and are not maintained by Real Life Planning. Real Life Planning has provided those links for your convenience but does not necessarily endorse all the material on those sites. Please consult your financial, real estate, legal, or tax advisor for advice specific to your situation.