Our experience has shown that some financial advisors significantly build their practice in a bear market. Part of the reason they thrive is that to some of their competitors, the telephone becomes a three hundred pound weight when the bear market hits. Those competitors may have difficulty explaining to their clients why their account values have significantly decreased.
The clients of these competitors may be investors who consciously sought financial advice, but when they needed their advisor most, they were not available.
We call these clients "The Great Detached Investors."
To help you establish yourself as a valuable resource for your clients during the next market downturn, Dunham has created the Bull and Bear in a Cloud marketing campaign. It consists of 14 white papers and three videos that, with your compliance approval, you can privately label with your name and logo.
You can share these materials with clients now to serve as a valuable resource for them before the next bear market. The program may make you more referable to your client's friends and family members, who may have become one of the “Great Detached Investors.”
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What is Dollar Cost Averaging?
Today we’ll be looking at how investors could take the emotion out of investing by Understanding Dollar Cost Averaging. Dollar cost averaging is the disciplined, systematic, and unemotional method of investing a fixed dollar amount at regular intervals, regardless of the market's direction.
For example, let's assume the market is declining or you fear it will decline, and you have $100,000 to invest that would typically be allocated to stocks. One of the historical challenges of investing in the stock market is that the market is cyclical. It goes up in value and decreases in value, but we do not know how much it will go up or how much it will go down, and we do not know when it will do either. Past performance is not indicative of future results.
With the hypothetical $100,000 investment in a declining market, some investors might limit themselves to two options; invest all of it at one time or not invest it at all out of fear of the declining market.
Dollar cost averaging may offer a third option.
Instead of putting all of the $100,000 in the market today, you could invest at regular intervals, regardless of the stock price. Maybe you decide to invest the money in equal amounts over the next 12 months.
The advantage of investing this way is that your money buys more shares at the lower stock prices when the market is declining and fewer shares at the higher prices when the market goes higher. What dollar cost averaging does is take advantage of the fact that markets typically move in cycles.
To take a closer look at dollar cost averaging, click here to gain access to a free, customizable white paper!
Although past performance is not an indication of future results, historically, what we have seen in the markets might suggest that dollar cost averaging may be a worthy strategy to consider, particularly when the market is declining.
Click the link below to watch our video on dollar cost averaging. Our dollar cost averaging video can be customized with your logo and disclosures by filling out this form. Please be sure to obtain your compliance approval before using customized marketing materials.
Stay tuned! Next week we’ll be sharing another piece of the Bull and Bear in a Cloud marketing campaign. It may be another useful tool when discussing market downturns with your clients.
Investments are subject to risks, including possible loss of principal. Investors should consider the investment objectives, risk factors and expenses of any investment carefully before investing. Diversification does not guarantee profit or ensure against loss.
No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Past performance is not indicative of future performance and are no guarantee that losses will not occur in the future. Future results are not guaranteed and a loss of principal may occur.
The S&P 500, or the Standard & Poor’s 500, is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. The S&P 500 Index components and their weightings are determined by S&P Dow Jones Indices. It differs from other U.S. stock market indices, such as the Dow Jones Industrial Average or the Nasdaq Composite index, because of its diverse constituency and weighting methodology. It is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy. You cannot invest directly in an index.
A bull market is defined as a market that is up 20 percent or more. A bear market is defined as a market that is down 20 percent or more.
All examples are hypothetical and are for illustrative purposes only. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues. The solution for an investor depends on their and their family’s unique circumstances and objectives.
Information contained in the materials that are included in the Bull & Bear in a CloudSM Marketing Campaign is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for informational purposes only and should not be construed as individual investment advice.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA / SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.