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The economy will recover, financial advisor says, making the downturn 'a real opportunity to create wealth'

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The U.S. stock market just capped three days of gains totaling about 17% for the S&P 500. In normal times, a move like that would be something investors would be more than happy to get in an entire year, let alone in a few days.

Of course, context is important. Amid concerns about the health and economic toll of the coronavirus outbreak, the S&P 500 remains in a bear market, defined as declines of at least 20% from recent highs. Since hitting an all-time high in February, this gauge has slumped more than 22% through March 26. While the past few days have seen the market rally, experts say you should expect more turbulence in the days and weeks ahead.

"We will get through this, and if you have a long-term horizon, markets are likely to be higher in the future than they are today," says Skip Johnson, co-founder of Great Waters Financial. "Markets are not going to go to zero." 

Experts caution that selling right now could be the most expensive mistake of your investing career. "Now is the time to chill and hang out," Johnson says.

This could also be a good time to invest money for the long term. "For young investors, there's going to be a real opportunity to create wealth once this pandemic subsides," says Mark Doman, the chief executive officer and founder of wealth management firm The Doman Group. Here's why.

'Decades matter'

The current bear market is the sixth for the S&P 500 since 1970, according to data compiled by Yardeni Research. Looking back at those past five downturns, there's been a consistent theme: The S&P 500 has always been higher just 10 years later and by an average of nearly 240%, according to FactSet data analyzed by Grow.

"What's happening now doesn't matter; decades matter," says Nick Yrizarry, president and chief executive officer of Align Wealth Advisors.

Ideally, you have a multi-decade investing strategy that you're sticking with right now. If not, these are the steps Yrizarry recommends you take:

  1. Make a long-term plan. Write down the kind of lifestyle you want for the future, along with what expectations you have for the next 30 years, he says, and tell yourself, "This is the plan I'm making to get there."
  2. Implement the plan. Even though many people write out a plan, they don't actually take the steps to implement it or give up because it seems like too much work. You'll need to make, and keep to, a budget to do so.
  3. Stick with it. It sounds so simple, but this advice is especially important at times like this. "No matter, through thick and thin, you stick with it," he says.

"It's simple, but it's not easy," Yrizarry says. "If you're in the trenches and getting panicked, step back out of the situation, regroup, get a counselor, calm down, and then come back in with a plan."

Investors who do so will find a stock market with lower prices, offering a greater chance of future returns. "That's where your success is going to come now," he adds.

Will the economy recover? A resounding 'yes' 

The economy has undoubtedly taken a hit due to the coronavirus outbreak, as businesses like restaurants, stores, and gyms have been forced to shutter temporarily. Nearly 3.3 million people filed for unemployment benefits in the week that ended March 21, setting a new record.

A question that Doman has been posing to his clients recently is: "After we get through this COVID-19 crisis, do you think the U.S. economy will recover?" And the answer is a resounding "yes," he adds says.

Because many of Doman's clients are in their 20s and 30s, their investment horizon is at least 30 to 40 years. On their behalf, he's looking to invest more money in stocks — and finding ways to save money in an effort to do so. 

The market's continued volatility, and trying to figure out its lowest point, doesn't have to matter that much to long-term investors. "The last tick of the market is not as urgent as if you're a speculator. We're investors."

For young investors, there's going to be a real opportunity to create wealth once this pandemic subsides.
Mark Doman
chief executive officer and founder, The Doman Group

Learning from this sell-off

This may be the first bear market you've experienced as an investor. You can expect about a handful of these over the decades, so use this one as an opportunity to see how this sell-off has made you feel.

"For those investors who are kicking themselves asking, 'Why didn't I get out in this time period?'" says Tom Stringfellow, the president and chief investment officer of Frost Investment Advisors. "The reason is simple: There was really nothing out there that said this could happen so quickly."

If you do want to make changes to your portfolio, consider selling shares of those companies that are less attractive and investing more in those that are more attractive now, Stringfellow says. "There are so many different industries and stocks that are trading at 30%, 40%, or half off what they were a couple months ago. Investors who felt like those were good securities a few months ago, now have bargain prices."

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Why you shouldn't panic when markets are bumpy

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Consider revisiting your risk tolerance if you've realized there's a mismatch in what you thought you were comfortable with, and what you actually are, Johnson advises. "Make sure you're looking at how much volatility you can handle and then compare it to your portfolio."

Finally, make some small tweaks, if necessary to your overall strategy — though not the reason you started investing in the first place. "Changing market conditions doesn't mean you change your investing philosophy," Johnson says.

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