on April 22, 2025
Financial advisors are often asked exceedingly difficult questions. Our clients want to know what will happen with X, Y, or Z. What about the tariffs? The government layoffs? The boycotts of certain businesses? I hate to be the bearer of bad news, but I do not own a crystal ball, and neither do any of my colleagues (believe me, we wish we did!). What we do have instead are historical patterns, proven strategies, and plenty of patience.
Beware of Those Predicting the Future
How many times have you heard a news reporter predict that we’re on the verge of a recession? How often have social media influencers predicted apocalypses? Or the end of capitalism? Or whatever the catastrophic prediction of the day happens to be?
And how often have those predictions come true? News outlets have published numerous articles over the past several years predicting a new recession, and it never materialized. After the precipitous drop in 2020, the stock market has boomed, growing steadily and hitting record highs, and the economy has grown with it. Recently, we have experienced another drop, but history tells us this isn’t permanent and there is no reason to panic. Historically, every bear market has eventually emerged from hibernation (although some bears have hung around longer than others). Since that’s the case, it’s important to stay calm, take a long-term approach to investing, and, as I wrote in my last post, proceed with a “business as usual” outlook.
Any reputable financial advisor should agree with this perspective but, unfortunately, disreputable financial advisors do exist. These are the people who profit off of fear—those who are more salespeople than financial planners. If your financial advisor is pushing new products or advising drastic changes to your investment plan, those are red flags. Remember that these advisors cannot predict the future, and it is irresponsible to advise a radical change in course just because of a temporary market slump.
Because Crystal Balls Don’t Exist…
Since we are stuck in the present with no reliable way to predict the future, we are forced to lean on historical evidence and reason to see us through rough patches or periods of uncertainty. Because of that, I suggest sticking to a few key investment principles:
Think long-term.
You’ll likely be more level-headed and reasonable when you tune out the daily noise and focus on your long-term plan and goals.
Trust the plan.
If you’ve worked with a prudent and trustworthy financial advisor, you should have a great financial plan already established. While it’s important to regularly meet with your financial advisor to update or rebalance your portfolio, it’s crucial to trust in this plan and know that it has been designed to meet your long-term goals.
Do not be reactive.
Bad news flies around the headlines, dominates social media, and crops up in conversations. Take it with a grain of salt. Since no one can predict the future, they cannot say with any certainty what will and will not happen. As long as you haven’t put all your investing eggs in one basket (i.e., you’ve maintained a robust and diversified portfolio), you should be able to weather any temporary storms.
Do not attempt to time the market.
In 2020, many people pulled all their money from the stock market because they believed we were on the brink of an apocalypse. As the market steadily made its recovery, these people had to buy back in at a loss. They would have been much better off if they hadn’t touched their investments in the first place. The lesson here is that it is exceedingly difficult to time the market, and many people who do this end up losing more than they gain.
If you find yourself with a crystal ball or a genie in a lamp, go ahead and do what you’d like with your investments! Otherwise, you’ll need to rely on the knowledge and tools that financial advisors have at their disposable. Essentially, this means trusting historical investing data, sticking to a prudent investment plan, and not making any rash decisions. While not as exciting as changing investment strategies or making a radical change, this tried and true advice has a history of working. And I stick by it.