Risk Realignment
May 20, 2020
During these volatile times in the market, it’s more important than ever to assess whether you are taking the right amount of risk with your investments. Taking the time to realign your risk could save you a lot of headaches in the months and years to come.
Here are just a handful of the things that we'll discuss:
THIS WEEK’S OFFER:
Transcript
John Stillman: Well hello and welcome to Wright Money Tips with Isaac Wright, chartered financial consultant and president of Financial Dynamics and Associates. I'm John Stillman alongside Isaac. You can also find him online at financialandestateplanning.com. You can call or text (804) 777-9999, if you'd like to set up a conversation with the team at Financial Dynamics. Again, (804) 777-9999.
John Stillman: Isaac, always a pleasure to talk with you. Certainly always a pleasure in these days of social distancing where we don't necessarily get to talk to that many people face to face so it's always good to have your company. But I wanted to talk today about risk realignment. When we say that very fancy term risk realignment, what the heck does that mean?
Isaac Wright: Well first of all, let me say, hopefully knock on wood with the states reopening and hopefully these phases that many states, including ours is going through, we can see some normalcy and just kind of reduce the fear. I'm not saying that this virus is going to go away, but being able to live and have, let's call it a routine, a strategy in place that can allow you to have more flexibility to your day than sitting in your living room. Looking forward to seeing how that plays out. And I'm pretty positive around that. But one thing that I just kind of want to say in today, and it's not going to be a long podcast, I want to be clear, we have really still going through the early innings of this virus and of course, we're not looking for a vaccine until maybe at the best case scenario, the end of the year from most medical experts.
Isaac Wright: We've got a long ways to go. But one thing I think when it comes to people's money that I have found that really caused the most stress in the early stages of when COVID-19 came out, was a lot more prevalent in our news media, was the fact that the stock market had its fastest drop, 30%, in the history of the market dating back to February 19th. Over 22 days, over 22 trading days, the market dropped 30%. Now, we've had a recovery since then and of course there's a lot of pundits right now saying that we're due for a continuous drop here through the year when economic data comes out. I really want to talk about whether or not are you properly positioned to tolerate your statements and or your money being down potentially a significant amount from where we're at today?
John Stillman: Risk realignment, I think a lot of people, it's easy to lose sight of the amount of risk you're taking when the market is just going up and up and up and up. You see this with real estate very often. People get really over leveraged with real estate. They keep buying all these investment properties that are fully mortgaged and they always have a renter that pays more than the mortgage. Well then suddenly if something happens in the environment and you're having trouble keeping people paying their rent, and now you can't make your mortgage payments, suddenly all that over leveraging on those rental properties comes home to roost.
John Stillman: And it's like the risk meter is broken. You never sensed that risk when everything was going well, you got lulled into this sense of security. And I think sometimes that can happen with the market too. When you see your 401K balance just going up and up and up, you kind of think, all right, well, I have this figured out. I'm pretty risk tolerant. I don't mind taking this amount of risk. Well, it's easy to think that when the market's going up, but suddenly you realize, oh, I'm not as risk tolerant as I thought.
Isaac Wright: Well, and that's why people, when we say chase returns, it's very difficult not to do that. When you come off a situation where the market's been up for almost 11 years as we headed into this pandemic, and I don't think anybody would ever in a million years, I wouldn't say a million, but I don't think anybody highly likely would have ever thought about a pandemic being the reason that our economy is where it's at today. But it sure is. And so now it's kind of thinking about when I say realignment, you said that term as well. That's kind of what we covered before we got on air today, is just thinking about the alignment of what risk tolerance you really need to keep because a lot of you have built up a pretty significant amount of money in your investments. You may be in a good place to be able to make a decision relative to retirement, other financial goals and how much risk do you really need to take to try to gain or eke out a large return? And how much volatility do you have to take on as well?
Isaac Wright: What I want to say today in our show, and I'm going to be direct about this, is I want you to call us. I want you to reach out. You can email me, you can call me, phone number (804) 777-9999. Of course our website, Financial and Estate Planning, you can email through that site. You can even text to 777-9999 and if you want to have a discussion about your investment risk and knowing or maybe not knowing how much money you potentially could lose if the market does what it did back from February in 22 trading days after that where it was down 30% in 22 days. The only other time we've ever had that was the Great Depression. And I just think it's important for people to realize that, I'm not saying we're going to head into a depression where we're down 60, 80% but is it real when you see the unemployment figures and you see some of the data that's coming out right now that we could be down from where we're at today?
Isaac Wright: Of course. I'm not saying the market necessarily always reacts the way you think, but many of you today I think could maybe potentially be in a situation where your lifestyle may be better than you think if you simply reduce the risk and focus on more of the preservation and let's say a conservative based portfolio or at least taking some defensive measures, especially when you see certain industries like airlines and even energy and retail. They're going to take time and potentially a long time to get back on their feet. Today, I just didn't want to have anything other than a direct conversation. If you listen to the podcast, I don't do this normally, but today I just want to be very forward and say, "Please take a minute if you have any concerns about your investments." This is exactly why people choose to work with our firm at these points in time because now people are realizing it wouldn't be a bad idea to get a professional second opinion.
John Stillman: And again, if you'd like to reach out to get that help. The number to call is (804) 777-9999. (804) 777-9999. Isaac, I think momentum is important with this kind of stuff because when you've been working from home, your habits have changed. Getting your financial house in order really seems like a good thing that yeah, I need to do that. Ah, I'm just not motivated right now. It seems like a lot of people are just sort of unmotivated on a lot of levels just because lifestyle has changed so much and overcoming that inertia to do anything new right now I think is difficult.
Isaac Wright: Yeah. I think, and I can speak from personal experience watching some of my family, watching or talking to some of the team here, you kind of have days where you have better energy. You're able to get a lot more done, but man, when those days come where you don't have it, I just want to say, we're here to make sure that hey, if you just add a few minutes to your schedule to talk to us, we can do a lot of the heavy lifting off of whether or not you're properly positioned and have a good conversation without wearing you down. I think this is more importantly just saying, "Hey, we want to protect and try to preserve maybe a situation that you have as an outlook on your investments that with maybe a few tweaks could be improved." If your, let's call it energy waned, not having the best days or have a combination of where you're on a roller coaster where you have a good day and a bad day. Let us try to bring a little bit of relationship value.
Isaac Wright: I think we're lacking the human connection and I think that's going to be playing out as we start reopening the economy. I think people are going to just ultimately decide for themselves in a great degree that their mental health is something they don't want to risk any further at the tune of a potential virus that may or may not happen to them. Please again, we're sitting here in the spring early, going into this situation through the summer. They've already talked about maybe another wave of this. Whether or not we'll be reopening schools and all the above. Let's get away from all that negativity. Let's talk about your own personal situation because that's one thing you kind of have some control over. We want you to call, so we're going to wrap up today.
Isaac Wright: I just want to say it's been very, very nice to see so many people take a minute to reach out to us over the past year and change doing the podcast. Always trying to bring a little bit of extra value. Our office is right here in Chesterfield, just outside of Richmond, but we serve the entire Richmond metro area. Again, reach out, talk to me directly, take a few minutes with you. Happy to help. (804) 777-9999. And thank you all so much for being a part of the podcast over that time.
John Stillman: Again, that number to call, (804) 777-9999. Call or text, (804) 777-9999. Isaac, always a pleasure to get some of your wisdom. We'll look forward to talking with you again soon, right here on Wright Money Tips. Have a great day.
Isaac Wright: Thanks, John.
Announcer: Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal, or tax professional before taking any action.
Announcer: Advisory services offered through JW Cole Advisors Inc., JWCA. Financial Dynamics and Associates Inc. and JWCA are unaffiliated entities.
John Stillman: Isaac, always a pleasure to talk with you. Certainly always a pleasure in these days of social distancing where we don't necessarily get to talk to that many people face to face so it's always good to have your company. But I wanted to talk today about risk realignment. When we say that very fancy term risk realignment, what the heck does that mean?
Isaac Wright: Well first of all, let me say, hopefully knock on wood with the states reopening and hopefully these phases that many states, including ours is going through, we can see some normalcy and just kind of reduce the fear. I'm not saying that this virus is going to go away, but being able to live and have, let's call it a routine, a strategy in place that can allow you to have more flexibility to your day than sitting in your living room. Looking forward to seeing how that plays out. And I'm pretty positive around that. But one thing that I just kind of want to say in today, and it's not going to be a long podcast, I want to be clear, we have really still going through the early innings of this virus and of course, we're not looking for a vaccine until maybe at the best case scenario, the end of the year from most medical experts.
Isaac Wright: We've got a long ways to go. But one thing I think when it comes to people's money that I have found that really caused the most stress in the early stages of when COVID-19 came out, was a lot more prevalent in our news media, was the fact that the stock market had its fastest drop, 30%, in the history of the market dating back to February 19th. Over 22 days, over 22 trading days, the market dropped 30%. Now, we've had a recovery since then and of course there's a lot of pundits right now saying that we're due for a continuous drop here through the year when economic data comes out. I really want to talk about whether or not are you properly positioned to tolerate your statements and or your money being down potentially a significant amount from where we're at today?
John Stillman: Risk realignment, I think a lot of people, it's easy to lose sight of the amount of risk you're taking when the market is just going up and up and up and up. You see this with real estate very often. People get really over leveraged with real estate. They keep buying all these investment properties that are fully mortgaged and they always have a renter that pays more than the mortgage. Well then suddenly if something happens in the environment and you're having trouble keeping people paying their rent, and now you can't make your mortgage payments, suddenly all that over leveraging on those rental properties comes home to roost.
John Stillman: And it's like the risk meter is broken. You never sensed that risk when everything was going well, you got lulled into this sense of security. And I think sometimes that can happen with the market too. When you see your 401K balance just going up and up and up, you kind of think, all right, well, I have this figured out. I'm pretty risk tolerant. I don't mind taking this amount of risk. Well, it's easy to think that when the market's going up, but suddenly you realize, oh, I'm not as risk tolerant as I thought.
Isaac Wright: Well, and that's why people, when we say chase returns, it's very difficult not to do that. When you come off a situation where the market's been up for almost 11 years as we headed into this pandemic, and I don't think anybody would ever in a million years, I wouldn't say a million, but I don't think anybody highly likely would have ever thought about a pandemic being the reason that our economy is where it's at today. But it sure is. And so now it's kind of thinking about when I say realignment, you said that term as well. That's kind of what we covered before we got on air today, is just thinking about the alignment of what risk tolerance you really need to keep because a lot of you have built up a pretty significant amount of money in your investments. You may be in a good place to be able to make a decision relative to retirement, other financial goals and how much risk do you really need to take to try to gain or eke out a large return? And how much volatility do you have to take on as well?
Isaac Wright: What I want to say today in our show, and I'm going to be direct about this, is I want you to call us. I want you to reach out. You can email me, you can call me, phone number (804) 777-9999. Of course our website, Financial and Estate Planning, you can email through that site. You can even text to 777-9999 and if you want to have a discussion about your investment risk and knowing or maybe not knowing how much money you potentially could lose if the market does what it did back from February in 22 trading days after that where it was down 30% in 22 days. The only other time we've ever had that was the Great Depression. And I just think it's important for people to realize that, I'm not saying we're going to head into a depression where we're down 60, 80% but is it real when you see the unemployment figures and you see some of the data that's coming out right now that we could be down from where we're at today?
Isaac Wright: Of course. I'm not saying the market necessarily always reacts the way you think, but many of you today I think could maybe potentially be in a situation where your lifestyle may be better than you think if you simply reduce the risk and focus on more of the preservation and let's say a conservative based portfolio or at least taking some defensive measures, especially when you see certain industries like airlines and even energy and retail. They're going to take time and potentially a long time to get back on their feet. Today, I just didn't want to have anything other than a direct conversation. If you listen to the podcast, I don't do this normally, but today I just want to be very forward and say, "Please take a minute if you have any concerns about your investments." This is exactly why people choose to work with our firm at these points in time because now people are realizing it wouldn't be a bad idea to get a professional second opinion.
John Stillman: And again, if you'd like to reach out to get that help. The number to call is (804) 777-9999. (804) 777-9999. Isaac, I think momentum is important with this kind of stuff because when you've been working from home, your habits have changed. Getting your financial house in order really seems like a good thing that yeah, I need to do that. Ah, I'm just not motivated right now. It seems like a lot of people are just sort of unmotivated on a lot of levels just because lifestyle has changed so much and overcoming that inertia to do anything new right now I think is difficult.
Isaac Wright: Yeah. I think, and I can speak from personal experience watching some of my family, watching or talking to some of the team here, you kind of have days where you have better energy. You're able to get a lot more done, but man, when those days come where you don't have it, I just want to say, we're here to make sure that hey, if you just add a few minutes to your schedule to talk to us, we can do a lot of the heavy lifting off of whether or not you're properly positioned and have a good conversation without wearing you down. I think this is more importantly just saying, "Hey, we want to protect and try to preserve maybe a situation that you have as an outlook on your investments that with maybe a few tweaks could be improved." If your, let's call it energy waned, not having the best days or have a combination of where you're on a roller coaster where you have a good day and a bad day. Let us try to bring a little bit of relationship value.
Isaac Wright: I think we're lacking the human connection and I think that's going to be playing out as we start reopening the economy. I think people are going to just ultimately decide for themselves in a great degree that their mental health is something they don't want to risk any further at the tune of a potential virus that may or may not happen to them. Please again, we're sitting here in the spring early, going into this situation through the summer. They've already talked about maybe another wave of this. Whether or not we'll be reopening schools and all the above. Let's get away from all that negativity. Let's talk about your own personal situation because that's one thing you kind of have some control over. We want you to call, so we're going to wrap up today.
Isaac Wright: I just want to say it's been very, very nice to see so many people take a minute to reach out to us over the past year and change doing the podcast. Always trying to bring a little bit of extra value. Our office is right here in Chesterfield, just outside of Richmond, but we serve the entire Richmond metro area. Again, reach out, talk to me directly, take a few minutes with you. Happy to help. (804) 777-9999. And thank you all so much for being a part of the podcast over that time.
John Stillman: Again, that number to call, (804) 777-9999. Call or text, (804) 777-9999. Isaac, always a pleasure to get some of your wisdom. We'll look forward to talking with you again soon, right here on Wright Money Tips. Have a great day.
Isaac Wright: Thanks, John.
Announcer: Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal, or tax professional before taking any action.
Announcer: Advisory services offered through JW Cole Advisors Inc., JWCA. Financial Dynamics and Associates Inc. and JWCA are unaffiliated entities.
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