The road to investment success is rarely as smooth as we would like. Market speed bumps can appear in many different forms and make clients question their portfolios. As an advisor, we know what the logical course of action is to weather a market sell-off. However, often your clients see the values of their portfolios fall, sparking panic and irrational behavior. Even though the current volatility is unprecedented, it is during these difficult times to remember that the markets have been tested before.
Here are some examples that may help your client conversations regarding market volatility.
Even after the two worst drawdowns in the last 25 years (tech bubble and financial crisis), many investors who avoided selling would have likely recovered their losses within 5 years or less.
It becomes increasingly difficult to break-even on investments following a substantial drawdown, making downside protection an important consideration.
Volatility in February 2020 occurred quickly but was still within historical norms. Despite an average intra-year drawdown of 15% over the last 20 years, the S&P 500 finished positive in 15 of 20 years.
While volatility has picked up, investors don’t have to subject their portfolios to the full force of the unpredictable swings in the market. BMO has a suite of products that may help dampen the impact of these rapid market fluctuations on their portfolios.
BMO Low Volatility Equity Fund may help reduce volatility and deliver meaningful alpha over full-market cycles.
BMO Pyrford International Stock Fund may help preserve your portfolio in down markets.
BMO LGM Emerging Markets Fund’s quality approach may help limit downside risk.
At BMO Global Asset Management, we believe better conversations lead to better outcomes for your clients and your practice. We seek to enhance your client conversations with:
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Market Turbulence Resulting from COVID-19. The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks.
