Zach Abrams Speaks with CNBC on Russia/Ukraine Market Volatility

Tuesday, February 14, 2023 |

Stocks are falling amid tensions between Russia and Ukraine. Experts say stay the course.


Carmen Reinicke@CSREINICKE

U.S. stocks are slipping as investors watch tensions between Russia and Ukraine rise.

The Dow Jones Industrial Average fell more than 270 points Tuesday as traders weighed how the situation will impact the global economy. The S&P 500 Index fell about 0.6%, and the tech-heavy Nasdaq Composite traded down nearly 1% around midday.

The Russia-Ukraine conflict has been a source of major market pressure recently, spurring back-to-back losing weeks on the major averages.

While this kind of stock price action can be nerve-wracking for investors, especially those near or in retirement, financial advisors generally recommend staying the course through market volatility.

Volatility is normal

All investors should accept market volatility — which is relatively common — as a normal part of the process of investing and the best way to outrun inflation, said certified financial planner Brad Lineberger, president of Seaside Wealth Management in Carlsbad, California.

“Embrace the volatility, because it’s why investors are getting paid to own stocks,” he said.

This means investors should stay calm even through extreme movements. While stocks always move up and down, long-term market returns are still based on the same things: dividend yields, earnings growth and change in valuation, according to Zach Abrams, a CFP and manager of wealth management at Capital Advisors Ltd. in Shaker Heights, Ohio.

Movements up and down can also be a good time to review your asset allocation. If you’re worried about a big drop, you could rotate part of your portfolio into some less-risky stocks to protect from a potential market correction, which is a drop of more than 10%.

Opportunities arise when stocks fall

When stocks fall, it can also be an opportunity to buy more and set yourself up for future gains.

This is because when stocks decline from recent highs, they’re trading at a discount and will likely recoup losses at some point.

Continuing to put money in the market when it’s down as opposed to selling is a great way to make sure you don’t miss out on a reversal. Data shows that selling when the market falls can take you out of the game for some of the strongest rebounds.

For example, if you missed the best 20 days in the S&P 500 over the last 20 years, your average annual return would shrink to 0.1% from the 6% you’d have earned if you’d stayed the course.

Be prepared for emergencies

Of course, even if you know that stock market volatility can benefit you in the long run, financial advisors still recommend having a cash emergency fund on hand so that you can make it through a market meltdown without selling. This is especially important for retirees.

If the stock market falls, it’s better to spend the money in your emergency fund than sell assets at a loss that can’t be recouped, according to Tony Zabiegala, chief operations officer and senior wealth advisor at Strategic Wealth Partners, an Independence, Ohio-based firm.

This also keeps stock investments in the game for big turnarounds, which generally come shortly after market corrections or even smaller dips.

For example, an investor would have needed only three to six months of living expenses in an emergency fund to avoid taking losses during the March 2020 meltdown, Lineberger said.

This approach would also have kept investments in the market for the record-breaking rally stocks enjoyed after the pandemic slump.

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

The views and opinions expressed herein are those of the author and may or may not represent the views of Capital Analysts or Lincoln Investment. Articles are not written or produced by the named representative and the information has not been verified. There is no guarantee as to the completeness or accuracy of the content. Quotes and remarks have been excerpted from conversations with the interviewer and may have been taken out of context. All remarks are hypothetical in nature and are intended to be informational only. They should not be regarded as investment advice, performance claims or testimonials. This is not a solicitation, recommendation or endorsement of any investment, investment strategy, tax strategy or legal advice. There is no guarantee that any strategies discussed will result in a positive outcome or the achievement of financial or retirement goals. A plan of regular investing does not assure a profit or protect against loss in a declining market. You should discuss any legal, tax or financial matters with the appropriate professional. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal.


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