Retirement Chat: Market Volatility

Market volatility is a hot topic these days and has investors wondering what they should do during all the market ups and downs. Jason and Joe from our Retirement Plan Services team are here for you with a brief discussion about a few key points related to market volatility:

• What is market volatility, anyway?
• The value of consistent, regular investing
• Should you try and time your investments in the market?
• What are risk tolerance and risk capacity?
• What resources and help are available from the team at UBT?

 

Audio Transcription:

Jason (host)

Hey everybody, thank you for joining us for this episode of retirement chat. In this series of conversations, we are going to be discussing some key topics related to, of course, saving for retirement. The idea here is really just to build on a foundation of information to help you understand your retirement plan and really just to help you reach the retirement that you envision for yourself. Today we're going to be discussing market volatility. I am your host, Jason, and with me today, I have a great guest, Joe Recker. Joe, would you mind just telling the folks, the listeners, a little bit about yourself and maybe your role within retirement plan services?

Joe

Yeah, so thanks for having me. So one of my roles is, I'm an investment officer at Union Bank. One of my roles is to help plan sponsors build their investment menu and then help monitor it. And so with that, you know, we make sure that there's a lot of different options on the menu for participants to invest their dollars in. And then another thing that I do is I help participants getting close to retirement with education letting them know what are some considerations they need to take, you know, when they get close to retirement, what are their options with their money and things like that.

Jason

Okay, perfect. So with that being said, your role obviously has a lot to do with investments, right? And so what we're going to be talking about today is, of course, market volatility. Let's just start with a general definition, maybe an explanation of what that actually looks like. What is market volatility, Joe?

Joe

I mean, just really simply put it's the stock markets’ overall value fluctuations, you know, up and down. And a lot of that is influenced by a lot of different market factors, but a lot of it's influenced by just general uncertainties in the market is really a lot.

Jason

What drives a lot of that volatility? Is it considered, this is sort of a, it's always a timely topic, right? I mean, market volatility is always sort of with us. How often do you think the market is actually volatile?

Joe

I mean, there's always movements up and down, so I mean, depending on how you look at it, it's always something you want to be considerate of. Okay. When you're saving for retirement.

Jason

Perfect. Speaking of which, what would be just some general considerations that a general investor might have, or might want to take into account during some turbulent times?

Joe

I mean, one of the easiest things that participants can do is just invest at regular intervals. You know, whether the market's up, whether it's down, you know, paycheck deferrals, you know, you're putting a percentage, your paycheck in weekly, monthly, whatever it is, but you know, if the market's down, you keep putting that same dollar amount in, and then you're just going to get more shares when the market's down. If it's up, you know, you're just, you're going to get less shares, but you're still, you're not trying to time the market. You're really just trying to keep investing making sure that you're not doing anything as far as market timing goes.

Jason

Is there a general term for that? Is that I think what I've heard is dollar cost averaging maybe. That's I don't think it's too technical, but that sounds to be like, that's, that's what you're talking about.

Joe

Yeah, exactly. That's the term is, is a lot of times they'll call that dollar cost averaging.

Jason

And the advantage to that is just an, just an ongoing, steady, putting into your retirement account.

Joe

Exactly. Kind of said, forget it. Just keep putting money in no matter what's going on with the markets.

Jason

Perfect. So you, you mentioned market timing. So if we could, let's just talk a little bit about that. I might have a couple of follow up questions there, but what is, what exactly, first of all, let's just start with, what is market timing? You mentioned that, that term what does that look like?

Joe

Yeah. I mean, market timing is really if you're going to buy and sell, depending on where the market’s at. So a lot of people when the market starts dropping, they'll tend to want to sell. And a lot of times that's not a good idea because sometimes you're just making some of those losses permanent within your portfolio. So it's very difficult to actually know, you know, when the tops or the bottoms of the market are going to occur. So you really want to be very careful when you, when you're thinking about timing the market.

Jason

And when you say being very careful and you're talking about, and we're talking about buying low, selling high, that type of a thing, you know, and there are certain investors who like to do that. And even when there's not quote-unquote market volatility, right. So just real quick, I mean, as far as, as maybe staying the course or, or is that sort of your thought process here when we start talking about market timing and, and sort of avoiding market timing? Obviously we're not giving advice here, but as you know, everybody is different and their stories are different. Every general individual investor is different. So talk a little bit about maybe the disadvantage of market timing and staying the course, that type of stuff.

Joe

So, it's really kind of a buy and hold strategy is what people, most people it's, that's going to be the best course for them. But you know, but as far as market timing goes, it's if you, if you sell at the low point and then you're trying to get back in, it's very difficult to know, you know, when the best time is. If you miss just a couple of those best trading days in a year, you're, you're really going to hurt your long-term returns, you know…

Jason

By being out.

Joe

By being out of the market, yep. Trying to get back in. Cause a lot of people, they, they get back in at the wrong time and then they miss out on a lot of those high trading days and then that's really going to hurt your long-term performance.

Jason

That's great, that's great information, perfect. So when people are thinking about staying the course or they're thinking about getting out or getting in, whatever it may be, I mean, are there people they could talk to? Is there, are there resources or are there certain people they could actually go to? I don't want to say get advice, but just get some may maybe some better information, you know, about their strategies — personal strategies.

Joe

Yeah, I mean, one, one way is you could, you can, obviously you can hire financial professional, you know, there's tons of different professionals out there, you know, as far as Union Bank goes, our education team is a good resource. Just to give you some general strategies on what maybe you should be considering as far as portfolio goes and, and you know what to do in some of these turbulent times, if, you know, if the market's having some ups and downs currently.

Jason

That's great information. You mentioned the educators. So I would be remiss if I didn't obviously mention the educators as well. Each one of our plans has a dedicated educator. So I would encourage any of our listeners to reach out to, to their dedicated educator, to get more information about their investment lineup maybe some different strategies along those lines. So I appreciate you bringing that up.

Joe

Yeah. And if anybody listening is getting close to retirement, you can reach out to me, definitely, because that's something I do is, you know, if you're thinking about retiring, you don't know exactly how your portfolio should look or, you know, what some considerations that you should be taking. That's something I can definitely we can talk about different options for you that you should be looking at.

Jason

Thanks, Joe. So one last thing, just to wrap this up a lot of good information. Thank you. You know, do you have any final recommendations, any final thoughts on market volatility? Just in general.

Joe

This goes for everything, you know, to combat market volatility is to have a plan. Know what your risk tolerance is, what's your risk capacity? Risk tolerance is kind of that emotional ability to handle those ups and downs, and risk capacity is what is your actual financial capacity? You know, if you're getting close to retirement, you might not be able to weather some of those down markets because you you're going to need access to that money sooner. So make sure you have a plan and you're well diversified. So that way the market volatility in those down markets, your portfolio doesn't take quite a hit.

Jason

Perfect. Thanks, Joe. I appreciate your time today.

Joe

Yeah, thanks for having me.

Jason

Please keep in mind that the information that was provided here is for informational purposes, only as educators, we're able to give you education. We are not able to give you financial advice. This is strictly for your information only.