Just last week, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite had undergone a peak-to-valley pullback of 30% since mid-February. That's nearly a third off the highs from only 30 trading days ago.
And it's a fast drop that's affecting just about everyone's bank account.
Sure, stocks have risen since then. But we could still go down from here... even further than we already have.
Friends of mine are starting to call their 401(k)s 201(k)s - and they're all asking me the same thing:
What will I do now?
My go-to answer here would be to trade.
But most people can't trade their 401(k)s, depending on who they're administered by.
So the next step would be to call your financial advisor - and ask them these three questions...
Three Things to Know About Your Financial Advisor
1. How are you paid?
If your financial advisor is flat-fee based, that's good news. It means they aren't getting paid based on how much you make or how often they change out products or securities in your account.
Sometimes there’s a conflict when that advisor is incentivized on transactions. There are occasional cases of churning – excessive trading to generate commissions. Hopefully most of you have a great relationship with your advisor and have built trust over many years.
2. How do you rebalance in times like this? [mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
You want to know exactly what they do when the market drops more than 20% into bearish territory. A good advisor has a plan for this and puts it into action once this number is hit. When these things happen, you want to know what your advisor's contingency plan is.
While they will know the details of your personal situation, you can find some of our rebalancing tips right here.
3. What are your plans going forward?
Now that the markets are down 30%, will they be cutting positions, or will they be adding at the new discount? This will entirely depend on your age and income needs. But what you really want to find out is what their plans are for the long term.
Most advisors are not options traders. So don't expect them to buy puts as protection or create spreads to hedge your securities. These folks are looking at the long term, and as long as your outlook is five years or longer, pullbacks are expected. Managers focus on long-term results, not short-term fluctuations.
The market's drastic fall that we've seen over the past few weeks isn't just some blip in the road. It's something that a good advisor should have expected and planned for - and you should know what that plan is.
In the meantime, make sure you watch my crisis response briefing…
With markets in a state of chaos, I’m here to help break down what that means for your money and your financial future.
Today, I’m granting virtual access to my command center to offer my analysis on where the market’s most critical areas stand and to explain what moves to make right now to help protect your wealth. Tune in right now…
The post Three Questions to Ask Your Financial Advisor in a Bear Market appeared first on Power Profit Trades.
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About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.