Upcoming Webinar Wednesday, March 25th at 11: Weekly Commentary March 20, 2020

March 23, 2020

In light of recent market turbulence and volatility, we are going to be hosting a webinar on Wednesday March 25th at 11am CST to deliver an economic update and Q&A session. This will be led by our Chief Investment Officer, Tim Courtney. There will be an invitation to follow.

War Chests, Volatility, and Investing in Today’s Markets

By Jared Snider, Senior Wealth Advisor

One of the jobs our clients entrust to us as advisors is to help ensure access to cash from their portfolios in both positive and negative markets. Most of our recent days in the market have been unpleasant. But, while the immediate cause of the pullback may have been unexpected, the fact that our clients are having to navigate some treacherous waters has not taken us by surprise.

Over an investor’s lifetime, we can expect multiple market declines, including several bear markets. Bear markets present a risk for investors in a position to withdraw from their portfolios and an opportunity for investors who have resources available for buying stocks at discounted prices. How investors navigate those risks and opportunities will have a tremendous impact on financial outcomes.


The Exencial War Chest Strategy

As a rule, we recommend holding at least five years of withdrawals in bonds and cash. We call this a War Chest of preservation investments. The average recovery time for stocks after our largest market pullbacks has been around five years. During a market pullback and the ensuing recovery, our clients’ War Chest of bonds and cash provide liquidity. This strategy avoids selling stocks at bad prices, so our clients experience the recovery that follows a pullback.

We feel it’s important in downturns perhaps more than any other time to remember that when we own stocks, we have an ownership interest in companies’ current and future cash flows and earnings. Companies’ 2020 earnings are dropping because of the economic downturn resulting from the coronavirus., but future earnings will rebound. Our willingness to continue ownership of these companies will be rewarded in time. For the present, we recommend allowing cash and bonds to do their dual jobs of hedging the stock market volatility and providing access to cash in this down market.

Think back to the recovery from the Great Financial Crisis that bottomed in March 2009. By mid-2013 or so, markets had recovered their losses. We guided our clients through that crisis through deploying our War Chest assets. That strategy paid off then, and we trust it will in this instance, too.

Putting Excess Cash to Work

We have had many clients ask whether this is a good time to invest. In short, the answer for long term investors is “Yes.” To quote Warren Buffet, a mark downturn is “an opportunity to increase our ownership of great companies with great management at good prices.” Here are some guidelines we recommend following for investing cash in this market:

• Avoid speculating or day-trading as this level of market volatility can destroy capital quickly.

• Buy large high-quality companies positioned to weather a potential cash crunch in the current economic conditions, but also include areas that often lead the market up in a recovery, like smaller companies and value-oriented companies. This advice applies to companies domiciled inside and outside the United States.

• Consider dollar cost averaging into markets with cash. No one is likely to time the market’s bottom perfectly. A plan for systematically putting cash to work and accelerating buys on larger down days should produce good results in time.

• Avoid giving in to your own inherent investing biases that could lead to becoming invested too heavily in your own company’s stock, your personal favorite stock, or in the sector in which you work.

• If your portfolio has become over-weighted in preservation assets, consider re-balancing by selling some preservation assets (bonds) to buy growth assets (stocks), assuming after doing so results in having your next five years’ portfolio spending intact in your War Chest.

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities. There is over USD 9.9 trillion indexed or benchmarked to the index, with indexed assets comprising approximately USD 3.4 trillion of this total. The index includes 500 leading companies and covers approximately 80% of available market capitalization.

Past performance is not an indication of future returns. All investments in securities carry risks, including the risk of losing your entire investment. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. In addition, there is no guarantee that the investment objectives of Exencial’s investment strategies will be met. Asset allocation and portfolio diversification cannot ensure or guarantee better performance and cannot eliminate the risk of investment losses.

Exencial Wealth is an SEC registered investment adviser; however, this does not imply any level of skill or training and no inference of such should be made. The opinions expressed herein are as of the date of this video and are provided for informational purposes only and are subject to change with notice. Content will not be updated after publication and should not be considered current after the publication date. Some of the information provided has been obtained by third parties and believed to be reliable, but it is not guaranteed. Nothing contained herein should be construed as a comprehensive statement of the matters discussed, considered investment, financial, legal, or tax advice, or a recommendation to buy or sell any securities, and no investment decision should be made based solely on any information provided herein.


PAST PERFORMANCE IS NOT AN INDICATION OF FUTURE RETURNS. Information and opinions provided herein reflect the views of the author as of the publication date of this article. Such views and opinions are subject to change at any point and without notice. Some of the information provided herein was obtained from third-party sources believed to be reliable but such information is not guaranteed to be accurate. In addition, the links provided within are for convenience only and the provision of the links does not imply any sponsorship, endorsement, or approval of any of the content. We do not guarantee the content or its accuracy and completeness. The content is being provided for informational purposes only, and nothing within is, or is intended to constitute, investment, tax, or legal advice or a recommendation to buy or sell any types of securities or investments. The author has not taken into account the investment objectives, financial situation, or particular needs of any individual investor. Any forward-looking statements or forecasts are based on assumptions only, and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. Any assumptions and projections displayed are estimates, hypothetical in nature, and meant to serve solely as a guideline. No investment decision should be made based solely on any information provided herein and the author is not responsible for the consequences of any decisions or actions taken as a result of information provided in this book. There is a risk of loss from an investment in securities, including the risk of total loss of principal, which an investor will need to be prepared to bear. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. Exencial Wealth Advisors, LLC (“EWA”) is an investment adviser registered with the Securities & Exchange Commission (SEC). However, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. EWA may only transact business in those states in which it is registered, notice filed, or qualifies for an exemption or exclusion from registration or notice filing requirements. Complete information about our services and fees is contained in our Form ADV Part 2A (Disclosure Brochure), a copy of which can be obtained at www.adviserinfo.sec.gov or by calling us at 888-478-1971

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