Are you tired?  We sure are.  2022 has been a grind for sure.  If you’re still feeling scared and worn down by a revolving set of worries, you’re not alone…and it’s completely normal!  The current political and economic environment makes even the most seasoned investor nervous. 

The past few years and what lies before can make us tend to question everything.  As a result, some people will be paralyzed by fear and confusion and not do anything. 

While others may panic and make rash decisions in the moment, which might bring temporary relief but end up costing quite a bit in the long run! Emotions play a starring role in our money making decisions and fear-based actions rarely turn out well.  In fact, in our decades of work, fear and greed based decisions have (at times) led to disastrous results. So before you panic- spend, buy, sell, etc. – take a breath, take a beat and let’s talk about the past for a minute.  

Picture it: It’s the year 2008 and we’re standing in the midst of a burst housing bubble, staring down the start of the fastest moving market crash in history.  

Personally, I (Doug here!) had more than a few moments of severe doubt.  Doubt of career choice.  Doubt of the integrity of the financial system.  Doubting that the bad news would even end.  I was lucky enough to take a trip with colleagues to the New York Stock Exchange in November 2008 which unexpectedly provided an opportunity to zoom out on my microscopic focus and see the bigger picture:  the world was still turning, people were still going to work, the stock market bell was still ringing every day and commerce was still in action.  We still had a rules based system which (for all of its flaws and inequities) still functioned then…and functions today. 

Staying invested in your investments – both literally and figuratively is possible even during this time and we actually encourage it.  What persevering DOES involve is shifting the strategies to adjust for changing times. Think of your financial plan like Google Maps or Waze. You plug in the final destination (and potentially a few additional stops along the way) and the app presents you with a handful of routes to get you to your destination. You’ll choose the best one according to what you need – likely it will be the one that gets you there the quickest and safest.  Once you’re on your journey, you may encounter unexpected external circumstances – traffic, construction, road closures, etc. So what happens next? Likely you don’t just turn around and give up –  the GPS system simply re-routes you to a direction that will still get you to your destination. You may have to change some of the stops along the way and you may have to adjust your expectations on timings but you’ll get there and along the way who knows what discoveries you’ll make on this new route!  This is exactly what we do now as an investor. 

Nearly all of our clients currently own some degree of both stocks and treasuries. Interest rates are HIGHER and have disrupted values in 2022 – but this also led to higher dividend payments^[1]Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company. across a myriad of investments.  The set of income investing opportunities has increased exponentially and the key to rerouting is being aware of the opportunities and how best to implement them based on your destination. 

The unknown can feel scary but the most successful and resilient people in history are the ones who, in any situation, look for the opportunity. The point is – there is in fact A LOT you can do right now – actually, quite  a lot you should do. There are also some things we recommend you don’t do. We’ll talk about all of that here in the hopes that you will walk away inspired and with an outline of some action steps you can take. Some of this stuff you can and will do on your own but for most of it we recommend working with a financial advisor – someone who is going to look at the process holistically and make recommendations that align with your long term goals, immediate needs, and your emotional relationship to money. If you haven’t already, you’ll learn that your financial advisor is not just your “banker” but your financial therapist.  The qualities you would look for when seeking a doctor – consider the same when looking for a financial advisor (just make sure they’re licensed ?)

So now let’s carry on – grab your coffee, pen and paper and get comfortable!

Let’s talk about all the things you can do!

• Revisit your goals:  Has anything shifted?  Has an increase in prices or interest rates changed your plans?  Has something changed in your family life which calls for an adjustment to your plan? 
• Revisit the purpose for each account you own (savings, brokerage, stocks, etc) & determine how your current investments are serving your future goals. This is an important one to help you determine where there is an opportunity to make different choices. We chat more about this in our Watch the Escalator Not the Yo Yo Article.
• Roth Conversions– Take advantage of this years’ correction and consider moving out of a pre-tax IRA, paying the taxes now & riding tax-free from this point forward!  PS: Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA. Be sure to get the scoop on this from your advisor!
• Continue or INCREASE 401k contributions: – especially if your employer has a match.  Bear markets historically end up being some of the best entry points and purchases within the life of retirement plans.
• Boring is BACK!  With interest rates on the rise, it may not be good for your credit card but it’s GREAT when it comes to making your cash do a little extra work for you!  Treasuries, money market funds, CDs and even some savings accounts are offering a higher yield than before.  
• Small consistent changes make big results.  Whether it’s putting just an extra penny into the proverbial piggy bank (hopefully it’s less of a ceramic pig and more of an online high yield savings account), shifting from a higher risk stock to a more conservative investment into bonds, or increasing your cash flow through a side hustle and stuffing it into a savings vehicle that yields some great returns while giving you the ability to access it as needed..Maybe this means the expensive thing you think you really really need you actually don’t really really need.  It will be different depending on who you are, your current situation, and your vision for your short term and long term future. 
• Adjust your strategies (think budget and investments) to add more cushion in your cash and keep you covered for any unexpected drops in income or expense increases. It may sound like we’re stating the obvious but sometimes it’s the “obvious” that we forget in times of stress. 
• Knowledge is key – you want to know what’s happening in the market, how it’s impacting your money, and all of the different strategies that exist. Soak up all of the information available to you – blogs, vlogs, podcasts, oh my! Take it all in, talk about it with your advisor and you’ll be surprised at the opportunities that exist all around you.

Now some things that we recommend you not do:

• Remember the age old saying – a watched pot never boils? Same goes for your investments. Stop checking your portfolio every day. Step away – do something else (maybe something from the list in the next topic below). 
• Right now, slow and steady can in fact win the race. Especially in a volatile market. Conservative investing can actually get you further than before.
• Don’t hate on bonds^[2]Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. just because they lost money in 2022!
• Be Careful with Money That You Might Need In The Short-Term.  Money that is needed in two years shouldn’t be in stocks – but can be invested elsewhere.
• Don’t stop putting into your 401k, Roth IRA or Retirement Accounts.

Take stock of your emotional health!

Remember when we said emotions and subconscious beliefs play a very significant role in your relationship with money? Just google behavioral finance.

• Get out of the house and out into nature! Even if it’s just standing in your backyard. Don’t have a backyard? Schedule a 30 minute stroll, sit on your front porch or stoop and drink your coffee. Stand on the sidewalk and breathe. Just do anything that involves Vitamin D and fresh air. 
• Give yourself a break from all screens first thing in the morning and at least one hour before bed. Introducing screens or social media first thing in the AM sets your brain up for distractions the rest of the day^[3]https://www.nu.nl/files/IDC-Facebook%20Always%20Connected%20(1).pdf. Screen time leading up to bed can decrease melatonin and increase feelings of alertness^[4]https://www.sleepfoundation.org/how-sleep-works/how-electronics-affect-sleep#:~:text=Tempting%20as%20it%20might%20be,tired%20and%20ready%20for%20sleep.. Life can be hard enough, no need to voluntarily introduce another reason to feel stressed like exhaustion.
• Hit snooze on the news – it’s great to be informed but information overload, especially if it’s a fear mongering narrative, will fuel anxiety. 
• Move your body! Even if it’s for 20 minutes.  A healthy dose of endorphins and some blood pumping will give you a different (hopefully better) perspective. 
• Pause on the doomsday scrolling – social media is great (especially if you’re following us 😉 ) but over stimulation can cause harm. 
• Call a trusted friend and talk through your concerns – someone who will be a great sounding board without judgment. 
• Laugh. Even if you don’t know what you’re laughing about. According to Mayo Clinic, laughing has both immediate and long term effects on your mental and physical health.

You made it! You stuck with us to the end! Hopefully you found these guidelines helpful & most importantly, encouraging! Refer back to it from time to time if you need a reminder of all of the things you CAN do or take it to your next meeting with your financial advisor and talk through some of your ideas.  If anything,  we hope we leave you with this – even if the media continues to scream that the sky is falling, it’s not.  Life all around us is still happening – and so is the commerce that sustains us. Stay steady, keep your eyes on the destination and remain open to different routes to get there! The best thing you can do is take care of your emotional health, self-educate, and find a financial therapist to support you along the way!

From all of us here at Arsenal Financial – have a Happy Holiday Season and an inspiring start to the New Year!

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.