Protecting Your Portfolio During Market Volatility

Market swings can make smart people do expensive things fast, like panic-selling, jumping strategies, or obsessively refreshing account balances. We talk through a calmer approach to market volatility that starts with one question: what do you actually need your money to do, and when do you need it? From there, we connect the dots between life stage, upcoming big expenses, and how much cash you should keep on hand so you’re not forced to sell investments at the worst possible moment.

We dig into how we help clients figure out their true risk tolerance using a structured risk assessment, then translate that into a practical asset allocation across stocks and fixed income. We also get real about diversification. Yes, it matters, but it’s not a magic shield, and years like 2022 prove that multiple asset classes can fall at the same time. That’s why habits and process matter as much as the portfolio itself, especially dollar-cost averaging with steady monthly investing through both up markets and down markets.

If you’ve ever felt the urge to “do something” during a downturn, we share the tools we use to stop emotional investing before it derails long-term plans, including a simple zoomed-out view of market history. We also cover how to think about higher-volatility areas like tech or emerging markets without betting the farm on a single stock, a single fund, or a single country. You’ll walk away with a rules-based framework for when to buy, when to sell, and how to keep your head clear when fear is high.

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Transcript

Welcome To My Pocket FP

SPEAKER_01 0:03

Welcome to My Pocket FP, the podcast where your wallet finally meets its financial planner and they actually get along. Join your host Jason Taylor, certified financial planner, money sensei, and your guide to financial freedom. Whether you're planning for retirement or just trying to figure out where all your money went last weekend, we've got you covered. Get ready to take control of your financial life with smart tips, surprising insights, and yes, an app that fits right in your pocket. This is My Pocket FP because your future deserves more than guesswork.

The Big Volatility Question

SPEAKER_00 0:46

Market swings feel scary, but the right strategy can turn volatility from something you fear into something you're prepared for. Welcome back, everyone. I'm Julie Schwenzer here with Jason Taylor, certified financial planner and the creator of My Pocket FP. Jason, thanks so much for joining us and continuing to teach us.

Cash Needs And Risk Assessment

SPEAKER_00 1:06

So we're guessing that people ask you this quite a bit when the market gets shaky. How do I protect my financial portfolio during market volatility?

SPEAKER_02 1:17

Yes, thank you, Julie. Uh, yeah, that's a very common question. Um, you know, especially, you know, we're talking bubbles, we're talking, you know, political unrest and all that fun stuff. It's a very, very common question people ask. And, you know, the big determinant is where you are in life, whether you have, you know, big expenses coming up like a baby, or if you're looking to retirement, how much cash on hand do you need is you know the first steps you look at as far as what you need to protect in order to live comfortably.

SPEAKER_00 1:46

Yeah, and a big question that we've seen too is that people want to know truly if they're conservative or they're a more risky investor. And how do they determine that with you?

SPEAKER_02 1:59

Uh yes, we're actually going through that with our clients right now. Um, we do a uh what's called a risk assessment, and it's just a series of questions to see where they sit now as far as how much money they're willing to lose, how much money they need, how close they're retirement. And it kind of does a grading scale and tells them, you know, how much stocks they should have and how much fixed income investments they should have. Uh something you should look at, you know, if not every year, every couple years, to make sure that you're invested properly.

Dollar Cost Averaging Through Drops

SPEAKER_00 2:28

Okay, and what advice do you give to somebody who is nervous when the market does become unpredictable, even if it's in the short term?

SPEAKER_02 2:38

Once again, if they're young, I tell them not to look at it and not to pay attention to it. And just, you know, with any age actually, just continually put money into the market on a monthly basis and dollar cost average into it. Whether it's going up or down, it'll benefit you in the long run.

SPEAKER_00 2:53

And then what about diversification? We know that's important and how that protects the portfolio during downturns.

SPEAKER_02 3:01

Yeah, generally diversification does help, but you know, even like in 2022, it it didn't fully uh protect portfolios because fixed income and stocks

Why Diversification Is Not Magic

SPEAKER_02 3:12

and gold and everything went down. So there was really no good investment with diversification. So you can't expect diversification alone to save your portfolio. But once again, if you're investing in the all the way down when it comes back up, you'll be ahead of the game.

SPEAKER_00 3:28

And what do you recommend to someone? You do these assessments of their financial portfolio. When should they look, like depending on where they are in life, when should they take a look at their portfolio and see if they need to make any big changes?

SPEAKER_02 3:42

Yeah, it's annual, it's uh life-based

When To Revisit Your Portfolio

SPEAKER_02 3:44

and you know, big life events, you know, kids going to college. You think that's gonna, you know, buying a house, anything's gonna cost a lot, that's gonna kind of reevaluate where you are and how much you know money you need on hand.

SPEAKER_00 3:55

And then what about risk tolerance? How does that play such a big role when you prepare for volatility?

SPEAKER_02 4:03

Well, you know, the more risk you're willing to take, you know, can you take some of those high flyers like you know, the tech funds right now, and you can not stress out or worry too much if they go up and down a lot.

SPEAKER_00 4:15

Yes, and then I'm gonna revisit this question because I I just know from my past jobs like how big of a deal this was. But how do you help clients avoid making emotional decisions? Um, sorry, market swings, and I know you mentioned too, you know, just hang on, just wait in many cases, but I'm sure that you might have to reassure them in other ways too. Is there anything else you say to them?

SPEAKER_02 4:39

You know, a lot of times you know, we'll point out the graph of the stock market in the long term, and we show these little blips of when the market goes down and how in the long term it really did not affect the overall uh performance of the market.

SPEAKER_00 4:55

That's great to show a reality check. And then for

Avoiding Emotional Investing Decisions

SPEAKER_00 4:58

the ones that are like more risky that are able to take that on, to take on that feeling of the unknown. What do you do when it comes to them that like they want to say, well, I'm interested in the emerging markets, or I'm interested in something that has been fluctuating quite a bit lately? Like, how do you handle that? And how do you make sure that they're prepared for the volatility that they could incur?

SPEAKER_02 5:22

So the first thing we do is make sure that they're not all in one stock. You know, if they like if they want to be in the tech, we make sure that they're not all in Broadcom or they're not all in Tesla or they're you know not all in Apple, that they kind of spread it out. Generally, they don't all work, they don't all go in unison. Uh, you know, for instance, you know, you know, Apple was up yesterday and everything else was down. So if you just had Apple, you're okay. But if you had just you know Broadcom, you'd be down for the day. It's good to spread it out regardless, um, whether you want to be in tech, whether it wanna be emerging markets, that you're not all in even in the emerging markets, you're not like all in Japan or all in Brazil. You spread it out across the board and have multiple different funds that you're investing in.

SPEAKER_00 6:03

And do you give specific strategies that are different for people close to retirement versus younger people, younger investors, or is it more just again, life situations?

SPEAKER_02 6:16

It really is life situations and how much cash they need. A lot of it's based on you know cash flow and how we can create the cash flow they need to live without taking too much risk.

SPEAKER_00 6:29

And then what are some long-term habits that help people stay confident even when markets are quite turbulent?

SPEAKER_02 6:36

Well, one of the worst habits I've seen, you know, especially with people in retirement, is they start to look at their stuff

Spreading Risk In Tech And Emerging

SPEAKER_02 6:42

every day, which adds a stress level that is not necessary for most people, unless they're buying and selling every day. You don't need to watch your stocks every day. That can be really stressful. So that's one of the bad habits I see with a lot of people. The other one is panicking and cashing out when the market's heading down. Uh, which, you know, once again, in the long term, when you watch a blips in the market, uh, it's really minimal if you have, you know, five, ten years you can hold that funds.

SPEAKER_00 7:10

Is that when you take them aside and say, okay, let's revisit how conservative maybe a of an investor you should be?

SPEAKER_02 7:18

Because uh We do, yeah, and see you know kind of you know fixed returns they can get without being too aggressive.

SPEAKER_00 7:25

Yeah, yeah, because you still want them to uh buy low and sell high, but it's tempting to sell low and buy high because they're too scared.

SPEAKER_02 7:34

So fear can really change someone's portfolio, yes.

SPEAKER_00 7:37

Yeah, absolutely. And then um, and then how do you deal with it too? I mean, you obviously invest yourself and you're pro at this, but I'm sure in the beginning, when you first started, I mean, how were you? Like how did you react and how did you walk yourself through through it if you were looking more frequently?

SPEAKER_02 7:56

Yeah, you know, in my younger days, I knew I was young, so I could always put more money into the market and you know continue investing in it. It's really when I started taking on other people's money that it became more stressful for me. However, you know, I had some

Habits That Build Market Confidence

SPEAKER_02 8:09

really good clients. Best example is back in 2008. Um, you know, everything's going down. You know, it's really hard, you know, companies were going bankrupt, and uh we didn't do bad with our investments, but you know, one of my clients actually came in and gave me a big hug. And she was a retiree on a fixed income, and she goes, you know, I understand these things happen, and she didn't have a lot on her account, and she lost a you know quite a bit. Um, but she came and gave me a big hug and said, We're gonna be okay, we've been through this before. So that really kind of helped me out a lot that year.

SPEAKER_00 8:41

Wow, that's that's a pivotal moment, that's for sure. And any other advice you have for people when it comes to keeping your head on straight and being prepared if there is volatility, which we've seen over and over again.

SPEAKER_02 8:54

Yeah, I'd say, you know, just you know put in like have a set um program that you're working. You know, set time you sell, set time you buy, and stick to it. A lot of people jump from idea to idea to idea, and that's kind of when they get stuck. But if you say stock loses 20%, I sell or I buy, you know, either way, just have a set amount of rules that you stick with with your investments. And when it gets really bad, start putting money in. Invested that time. You know, it was you know, Warren Buffett always says, you know, the best time to invest is when everyone's full fear. Um, and opposite, you know, best time to sell is when everyone's elated with the returns. So uh that's coming you know

Rules Based Investing And Closing

SPEAKER_02 9:33

from the one of the greatest investors ever. Uh so it's a good way to live by just have a set of rules and stick with it.

SPEAKER_00 9:38

Yeah, that's great advice. Well, Jason, thank you so much for helping people feel more grounded during uncertain times. We appreciate your guidance.

SPEAKER_02 9:47

Thank you, Julie. Have a good day.

SPEAKER_00 9:49

You too. Thank you.

SPEAKER_01 9:54

Thanks for tuning in to My Pocket FP, where we believe small monthly changes can make big positive changes in your financial end game. If you're ready to level up your money game, head over to mypocketfp.com and download the app today. Your financial planner is now officially pocket sized and doesn't charge by the hour. Until next time, keep your goals high, your debt low, and your pockets smart.