Dow plummets nearly 650 points following midterm election results. With market volatility top of mind in 2022, we asked 5 financial advisers: What are you doing with your own …

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Inflation still sits near a 40-year high, the Fed recently raised rates another 75 bps with Chairman Jerome Powell suggesting “ongoing increases” ahead, and the Dow Jones Industrial Average just shed more than 646 points today as investors react to the midterm election results. So, is it really any wonder financial pros say a recession is imminent (recent Bloomberg Economics projections, for example, called for a 100% chance of a downturn by October 2023)? Even a balanced approach has reported losses, with the 60/40 portfolio notching its worst performance in nearly 100 years. So we asked financial advisers: In this tumultuous economic climate, what are you doing with your own money for the remainder of the year? (Looking for a new financial adviser? This tool can help match you with an adviser who might meet your needs.)

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More in high-yield savings accounts and I-bonds – Nick A. Covyeau, a certified financial planner and founder of Swell Financial

Nick A. Covyeau, a certified financial planner and founder of Swell Financial, a fee-only planning firm in Costa Mesa, California, said that although he has been more protective during this past year, he is still a “believer in long-term investing, well-diversified portfolios and capitalism.”

For his short-term investments, Covyeau says he is “taking what the banks and the Fed will give me and have placed money into high yield savings accounts and I-bonds for both my wife and me.” For his non-retirement accounts, Covyeau says the two are taking “advantage of tax-loss harvesting to realize any built-up long-term gains and reset our cost basis. Anything left over, we can use $3,000-per-year to offset income.” 

He added that he’s “reallocating any overweight or underweight positions back into alignment with proper asset allocation” for his long-term investments and using automated tools to “buy weekly into the market. We’ve made sure of this by setting up weekly draws from our savings account into our IRA’s.”

Increased cash reserves – Bryan Hasling of Lodestar Private Asset Management

To mitigate recession risks, Bryan Hasling of Lodestar Private Asset Management in Alamo, California says he has reevaluated how much cash he and his family keep on hand. “While we know that investing extra dollars into the markets is a wise long-term move, increasing our cash reserves for some upcoming goals makes us feel more in control of our situation and plans,” Hasling says. “We also know that, even though banks are paying stronger interest rates again, we are still losing to inflation on those funds. Even still, ample cash helps everyone sleep better during times of uncertainty.”

Increased exposure to value stocks and dividend payers, less international exposure —  Stephen Frick, wealth advisor at Merit Financial Advisors

Stephen Frick, wealth advisor at Merit Financial Advisors in Jacksonville, Florida, says he has focused his lens to adjust for the threat. “Even though I do have a long-term investment horizon, I have a lower allocation to growth stocks than normal and have increased my exposure to value stocks and dividend payers,” Frick said, adding that he also has, “less international exposure than normal due to heightened geopolitical risks.” Frick says he has not completely abandoned international stocks because he still wants to stay invested “in the event of a resolution to the war in Ukraine. If that were to happen, international stocks could get a nice bump and I don’t want to miss that.”  

Although traditional diversified approaches like the 60/40 have produced a near 30% loss this year according to BofA estimates, Frisk says he has dug in with some alternative options. “I further diversified my equity exposure by focusing on companies with quality balance sheets and cash flow,” he said. “For the more open-minded investors who are looking to use a part of their portfolio to curb volatility, funds that focus on managed futures could be a good short-term trade.”       

Ultra-short-term bonds – Nicholas Bunio, a certified financial planner at Retirement Wealth Advisors in Downingtown

Nicholas Bunio, a certified financial planner at Retirement Wealth Advisors in Downingtown says he moved some of his own money into “ultra short term bonds due to rates,” but notes that taking even a similar approach to the investment professionals isn’t always the right strategy. He adds: All investors are “unique, including advisers,” and “some advisors are younger than others,” and others “have higher risk tolerance.”

In short, Bunio says to ensure whatever strategy you choose is right for your own goals. Although his “retiree clients have the same bond funds — just much more in it,” he adds that “investing itself is very personal and tailored. All my clients do have different allocations, based on their needs and timeline. Including myself.” (Looking for a new financial adviser? This tool can help match you with an adviser who might meet your needs.)

Fixed-income assets – Larry P. Ginsburg, president of Ginsburg Financial Advisors

Larry P. Ginsburg, president of Ginsburg Financial Advisors in Oakland, California says even though his clients are often in a different stage of life, he still insists on practicing what he preaches. “I continue to invest in the same assets we recommend to our clients,” Ginsburg says. “The exception is that since I am still working, my percentage of equities compared to fixed income is much higher than most of my clients.” 

He added that his firm has continued to use bonds to fund client distributions during the current market downturn. “This strategy gives client portfolios the opportunity to fully recover when the equity markets begin their upward movement.”

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