In times of market uncertainty, it's natural to feel concerned about your investments. However, as BryanBibbo, AIF, NSSA, BPC, our President and CFO of JL Smith Holistic Wealth Management,
reminds us— market volatility is a normal and recurring aspect of investing.
Let's dive into why these fluctuations are common and how The Bucket Plan® strategy we incorporate
into every financial plancan help protect your assets during more turbulent times.
Understanding Market Volatility
Market corrections are more frequent than you might think.
As the graph below shows, over the past 20 years (2002-2021), the S&P 500 has experienced:
- Declines of at least 10% in half of those years
- An average intra-year pullback of 15%
What does this mean? While sudden drops can be unsettling, they're part of the natural rhythm of the
market. Current factors like general economic changes,global conflicts, and the political climate can all
contribute to this volatility.
Source: Schwab Center for Financial Research with data provided by Standard & Poor's.
Return data is annualized based on an average of 252 trading days within a calendar year. The year begins on the first trading day in January and ends on the last trading day of December,
and daily total returns were used. Returns assume reinvestment of dividends. When out of the market, cash is not invested. Market returns are represented by the S&P 500® Index. Top
days are defined as the best-performing days of the S&P 500 during the 20-year period. Indexes are unmanaged, do not incur fees or expenses, and cannot be invested in directly. Past
performance is no guarantee of future results.
The Bucket Plan®: Your Shield Against Volatility
At JL Smith, we implement The Bucket Plan® to help protect your assets and provide peace of mind
during market fluctuations.
This strategy helps ensure that your immediate and near-term needs are covered, allowing your long-
term investments time to recover from any market dips.
Here's how it works:
- Now Bucket: Safe and liquid assets for immediate needs, unaffected by market swings.
- Soon Bucket: Conservative, income-oriented investments for short to medium-term goals.
- Later Bucket: Long-term growth investments (10+ year horizon) that can weather short-termvolatility.
Remember, most portfolios aren't 100% in stocks. Depending on your risk tolerance, you might have a
mix of stocks and fixed-income investments (for example, 80/20, 60/40, or 50/50), which helps
mitigate overall portfolio vulnerability.
The Power of a Holistic Financial Plan
The Bucket Plan® strategy was developed to help our clients navigate market ups and downs with
confidence. And when it comes to managing your wealth, holistic plans offer more income sources that
can ease your economic worries. For example, if you have annuities or are leveraging life insurance as
an asset class, you have multiple streams of income. That means that what’s happening in the market
momentarily is less impactful than if you relied on one income source.
Additionally, if you have a health savings account (HSA), long-term care plan, or Medicare supplement
insurance plan, this helps your healthcare costs be accounted for in your overall financial picture,
particularly in the event of the unexpected. Having a comprehensive financial plan that incorporates all
these things and more,allows you to stay focused on your long-term goals without being swayed by
short-term market movements.
Opportunities in Market Downturns
Instead of viewing market dips negatively, consider them as potential opportunities. You can:
- Invest cash reserves: With some company valuations lower, it might be an ideal time to investidle cash.
- Perform Roth conversions: Converting traditional IRA funds to a Roth IRA during a downturncould result in paying less in taxes.
Navigating Future Ups and Downs with JL Smith
Remember, market volatility may seem concerning but it is a normal and expected part of investing
even though we can’t predict when things will change. With the right strategy and guidance, you can
comfortably keep your money engaged in the market and stay on track to achieve your long-term
financial goals.
At JL Smith Holistic Wealth Management, we're here to guide you through all conditions. If you have
any questions about your portfolio or would like to review your comprehensive wealth management