In a Market Downturn, Think & Act for the Long-Term

SigFig Team

Concerns about market volatility, inflation and the impact of the Russia/Ukraine situation have investors concerned. We understand that volatile markets can frighten even the most seasoned investors. However, history has shown that day to day fluctuations have little impact on the long-term growth of a well-diversified portfolio, and that downturns can also create times of opportunity.

Keep in mind that market swings are to be expected. There are some actions you can take now, as well as actions to avoid, to help reduce your risk and position yourself to invest more confidently in a period of volatility.

What to do - and not do - when the market is volatile

Don’t try to time the market.

Selling investments based on fear may prove costly. It’s impossible to know if the markets will move higher in the coming days or continue with volatility. If you begin selling your investments at the first sign of a market downturn, you might be able to limit your losses. But there may be tax consequences to selling, and you might also miss out on a market upswing. Markets rise and fall, often without warning, which makes it difficult to try and buy or sell investments at just the right time. Attempts to time the market, by jumping out at initial signs of market tops, or jumping in at signs of market bottoms, historically underperform a disciplined, buy-and-hold, stay-the-course approach.

Set up recurring contributions.

We strongly advocate setting up regular, recurring deposits into your portfolio. These serve several purposes. First, they build your account value, getting more of your assets to work for you. Second, deposits could trigger a simple rebalancing of your portfolio and pick up small relative under-valuations between asset classes. Finally, they enable you to invest consistently when the market has experienced a larger decline. These factors all combine to lower your portfolio volatility and your overall risk.

Maintain a well-diversified portfolio.

A properly diversified portfolio will help you to better weather any number of situations. By investing in different types of asset classes and in different areas of the market, across a broad range of companies, industries, economies, and markets, an investor’s risk exposure is spread out— potentially minimizing losses when one area of the market falters. Your SigFig portfolio is fully diversified and monitored daily. We’ll rebalance it when necessary to address market fluctuations and notify you when action is needed on your part.

Reconfirm your risk tolerance.

If the recent market downturn has made you overly nervous, that might be a signal to rethink your risk exposure. It’s easy to re-take your risk tolerance questionnaire and see if your portfolio's risk level matches your current comfort level with market volatility. Your portfolio should be aggressive enough to achieve the long-term returns you want, while still enabling you to hold steady through short-term market pullbacks.

Consider harvesting available tax losses in non-retirement accounts.

Our investment team is always looking for opportunities to optimize your taxes. They identify where they can lock in a lower cost-basis and capture tax losses, allowing you to use that loss to offset other gains (and even income) to potentially reduce your taxes. After harvesting a loss, we purchase similar asset class ETFs so you remain fully invested for a market rebound while avoiding wash sales. If you haven't turned on Tax Loss Harvesting, you can do it from your SigFig account.

We are here to help. Please contact us if you have any questions about your account, or wish to speak to one of our financial advisors. You can contact us at 1-855-555-4321, by emailing [email protected], or by scheduling an appointment online.

This material is for informational purposes only and does not constitute investment advice or a securities recommendation. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances. Diversification does not protect against market and other risks, and all investment strategies involve risk of loss including the loss of principal.

This material also is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

© 2022 SigFig Wealth Management, LLC, a registered investment adviser.

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