How to Invest (Or Not) Calmly Amidst Chaos

Black and white Wall Street sign next to a green traffic line

With Maeve a junior now at Quinnipiac studying nursing, Phoebe heading to Worcester Poly Tech for bio-medical engineering and Sophie off to Bryant for business in the fall, all three of them have heard Jill and I say since they can remember, “Knowledge is power”. The quote was supposedly first spoken by Francis Bacon, an English philosopher from the 1500s. His message was that people can achieve their goals and achieve outstanding results by using knowledge.  

As we have tried to teach them that it’s not just that knowledge is power; rather, it’s the will and the ability to act on knowledge that is so powerful.  You see, while you may have crucial information, folks may not act on it for a variety of reasons, such as you choose to ignore it, don’t necessarily understand it, or are too busy to act on it.

In my world of finance, knowledge is the cornerstone of investing and retirement planning. Financial literacy at its core involves having the knowledge necessary to make important financial decisions. But to use your knowledge successfully, you must know that the information you’re working with is accurate, complete and unbiased. 

But what if the knowledge you think you have is potentially faulty? I have a perfect example of this – I recently spoke with a long-time client, I’ll call him “Joe”. I’ve worked with Joe and his wife, “Maggie”, for almost a decade to help prepare them for retirement. They’ve always dreamed of traveling the country by RV and check off every US state on their list, and they are now within three years of retiring and getting on the road. Joe called me with anxiety in his voice – he had been following the news a lot lately and was worried about the markets so close to his retirement. 

The “war” in Ukraine, for example, had him wondering how the US markets would respond longer term. He’d been reading articles, blogs and various predictions from many so-called “experts” online, and there wasn’t consensus about how current events would affect his portfolio. Some investment firms, for example, gave conflicting advice – buy consumer-staple stocks. Buy oil or gold. Sell your bonds. 

He also wondered how he should react to actions by the Feds, such as the Federal Funds rate. With signs pointing to a number of potential interest rate increases in 2022, Joe worried that he needed to take some action now. Essentially, Joe was suffering from information overload and felt pressure to react to it by making changes to his portfolio.

As we spoke, I explained that it’s crucial that we act prudently and thoughtfully. We don’t just reshuffle our assets around based on the news headlines. While many professional investors and investment firms have revised their holdings or investment strategies to align with their own investment and economic forecasts, we don’t have to. In fact, we don’t have to act at all. 

You see, folks, as individual investors we need to evaluate not only the current headlines and investment firm predictions but our own unique needs and holdings. Reading conflicting opinions and predictions online is not the real knowledge we need to make the right decisions for our money.

In addition, it’s an especially bad idea to overhaul your portfolio when you’re afraid. I reminded Joe that he and Maggie have a sound retirement system in place. One that is uses advanced statistical relationship modeling between economic levers and our investment recommendations. We developed their system to help weather the impact of recessions, crises, and other economic events using historical research and analysis on how economic indicators are correlated and their potential effects on their investments. Essentially, they have a system in place that was developed with the understanding that financial chaos is unavoidable, and we don’t need to react by making hasty decisions.  Especially decisions based on news headlines, opinions and potentially faulty “facts”. To have the real knowledge necessary to manage your portfolio, you must shut out the noise, the pundits, and the internet “experts”. It’s by filtering this out and focusing on the facts that we’re in the best position to succeed.

Yes, knowledge is power. But only if it’s based on real facts and acted on appropriately – and within the context of a sound retirement system.

So as always – be vigilant and stay alert, because you deserve more!

Have a great week.

Jeffrey Cutter, CPA/PFS offers investment advisory services through Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield. 

Jeff can be reached at Insurance products, including annuities, are offered through Cutterinsure, Inc., (MA insurance license #2080572). Cutter Financial Group and Cutterinsure are affiliated and under common control but offer services separately. Members of Cutter Financial Group’s management receive revenue directly from Cutterinsure. Any compensation received is separate from and does not offset regular advisory fees. Cutter Financial Group does not charge advisory fees on any insurance products. We do not offer tax or legal advice. Always consult with qualified tax/legal professionals regarding your own situation. Investing in securities involves risk, including possible loss of principal. Insurance product guarantees are backed by the financial strength and claims-paying ability of the issuing company. This article is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Market data and other cited or linked-to content in this article is based on generally available information and is believed to be reliable. Please contact us to request a free copy of Cutter Financials’ Form CRS, Form ADV 2A and applicable Form ADV 2Bs.