Portfolio Theatrics: Surviving Market Volatility

By June 19, 2017 Blog No Comments

There’s no question about it, the traditional investment experience is quite a ride. You know, the periods of pure euphoria when your portfolio is shooting toward the moon, followed by the disappointment felt when the economy is in a downtown and your portfolio feels like the bottom has fallen out.

Fortunately, there is an alternative that can minimize the emotional and financial roller coaster that has become commonplace in the field of financial services. But to find it, you must look past the smoke and mirrors.

Smoke and mirrors, huh? Care to explain?

If you’ve ever sought out a relationship with a financial professional, you’ve probably come across at least a few advisors whose only “claim to fame” is being able to consistently outperform the market.

Now, when I say smoke and mirrors, I’m referring to the portfolio theatrics that some of these financial “advisors” employ to try and “beat the market”, aka earn an investment return greater than that of the S&P 500 index.

Here’s the thing, unless you’re looking to gamble, attempting to beat the market is the wrong path and one that can cause tremendous damage to your portfolio.

Think about it this way, for a portfolio to outperform a market index, it has to be significantly more aggressive than the index itself. In many cases, that means overexposure to risky companies and/or sectors, which will considerably magnify losses when the market takes a turn for the worse.

This is what happened to investors during the dotcom bubble burst.

Risk Management > Chasing Returns


Chasing returns is not only an unsatisfying and highly stressful experience, it can also be dangerous depending on the life stage you’re in.

For that reason, many financial advisors advocate for managing clients risk and aligning those risk with long-term goals instead of targeting returns.

Ironically, concentrating on risk rather than returns has been shown to actually lead to stronger portfolio performance.

This is primarily due to the fact that, in exchange for lower returns than the overall market during a bull run, investors that have their risk adequately managed can expect less exposure — and hopefully less of a portfolio dip — during times of crisis.

To achieve these results though, it’s imperative that investors take a long-term view toward their financial future and align themselves with financial professionals that embrace the idea of risk management and rely on the results to achieve stable, long-term returns.

True Financial Advice

The primary duty of a financial advisor — specifically one that is held to the fiduciary standard — is not to select investments aimed at outperforming the overall market.

Instead, they are responsible for providing their clients with advice on all aspects of money management and finances. This advice can run the gamut from simple things like debt management, budgeting, and navigating employee benefits, to more complex issues like taxes and estate planning.

This is why I find so much enjoyment in what I do. No two interactions are exactly the same!

At the core, my job as an advisor is to provide financial advice that is applicable to the individual client that I am serving.

That means no one-size-fits-all solutions.

I have clients that are from different income brackets, with varying levels of job security and familial responsibilities. Not to mention, each client I meet with has their own financial goals, money behaviors, and levels of risk tolerance.

That requires that I know each of my clients on a deeply personal level, otherwise it would be impossible to recommend the correct course of action for them to avoid roadblocks on the path toward their financial goals.

At Woven, helping clients manage their long-term investments is a part of the job, but rest assured; there aren’t any portfolio theatrics to be found. Beating the market will never be our “value-add”. Instead, we will continue to be driven by providing financial advice that is designed with each individual client’s financial goals in mind.

If you’re tired of the smoke and mirrors and would like to learn more about financial planning that is solely focused on your goals, we should talk. Click here to schedule a meeting to determine if Woven Capital is a good fit for you.

About Woven Capital

Aaron Hatch is a Certified Financial Planner and co-founder of Woven Capital, a fee-only financial planning and investment management firm that specializes in helping people balance life, work, and community. Aaron has been quoted in various publications, including The Chicago Tribune, US News and World Report, and the Huffington Post among others. Aaron can be reached at aaron@wovencapital.net