Throughout the NCAA tournament games I’ve noticed a new John Hancock advertising campaign showing upscale looking couples in their late 40s to mid 50s sitting in their financial advisor’s office with the theme of getting back into the markets. One ad in particular portrays a sense of optimism among these investors. As an ad this is brilliant. The sentiment depicted is, however, beyond disturbing to this financial advisor.
Why it’s brilliant
The current stock market rally has been in place since March 9, 2009. Of late the stock market has been creating headlines as the Dow Jones Industrial Average hit an all-time high and the S&P 500 has been flirting with its all-time highs. The ad depicts investors who have been out of the market totally or who have been underweight in stocks and are now looking to get back in. They feel better about things, the market has recovered. This commercial is catering to this sentiment and offering advice to those in this situation. I suspect this segment of the investing population is significant. This ad and the others in this series are brilliant in this regard.
Why it’s disturbing
The market is in record territory, we feel better about stocks, let’s get back into the market now. If you stop and think about this thought process it’s flawed on so many levels. While I’m not saying that the markets may not continue to go up for awhile, this is a great example of how many individual investors get hurt, they buy high and sell low. While you can’t expect to hit the exact bottom as an entry point or the exact market top as a point to sell, does four years into a rally seem like the right time to get excited about the stock market to you?
Tooting the horn of competent financial advisors everywhere, this is why a relationship with a trusted advisor is so critical to many investors. My clients had largely recovered from the last market downturn in mid 2010, some a bit later, some a bit earlier. Other advisors with whom I discuss such matters had the same experience. It’s not that we have some secret investing philosophy; it’s that we work with our clients and keep them invested in a manner consistent with their financial plan, risk tolerance, and their goals. In many cases the best thing we do for our clients is to keep them from acting on their own worst investing instincts, which for some might have entailed getting out of the markets in late 2008 or early 2009, incurring horrible losses which could have taken years to recover from.
Investing and financial planning go hand in hand
Sadly the couples depicted in the John Hancock commercials are probably more typical than we’d like to think. A financial plan is not the cure for everything, but it provides a blueprint to fall back on when things get tough in the markets.
- What were my assumptions?
- How are we progressing towards our goals?
- Has the market drop thrown us off track?
- Do we need to make some adjustments?
And make no mistake; we will have another down market again at some point. Investing only when things “feel good” in the markets is not a strategy, its insanity. Don’t be one of the couples that John Hancock is targeting. Get a plan in place, hire an advisor to assist you if need be. If you do hire an advisor, I suggest you seek out a fee-only advisor who doesn’t have the inherent conflict of interest that comes with the need to sell you financial products (full disclosure I am a fee-only advisor).
To be clear I’m not saying that investors shouldn’t be in the markets or that they shouldn’t commit any new money to stocks. What I am saying is that if you are asking questions of the sort depicted in the John Hancock commercial it’s time to get serious about your retirement and your financial future.
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Photo credit: Flickr