How to invest in today’s market—according to the experts

This past week, the recent bank collapse sent the greater banking world reeling.

the failure of two major US banks—Silicon Valley Bank and Signature Bank—also sent shockwaves through financial markets, causing major bank stocks to decline which led to a temporary halt in trading in many bank stocks in the region.

First Republic Bank saw its stock tank 62% on Monday after a 33% decline last week. Shares of PacWest Bancorp and Western Alliance The Bancorp decreased 21% and 47%, respectively.

As for what these recent failures mean for investors, experts say it’s an opportunity to reflect and may look for ways to take advantage of lower valuations.

“The collapse of SVB should raise red flags for investors in high-premium securities in the venture capital and private equity sectors. Current economic conditions are causing high-risk investments to fall apart. amount, and the collapse of SVB is likely to add to that trend,” said Clark Kendall, CFA, AEP®, certified financial planner, President and CEO of Capital of Kendall in Washington, DC. “Bank stocks have reportedly lost at least $100 billion in market value since the collapse. I think that’s an overreaction, but it creates opportunities to invest in attractive banks in these appreciation.

What investment professionals have to say about investing in today’s market

In times of high inflation when interest rates are hitting record highs and seemingly stable banks are collapsing, it can be difficult to know what to do with your investments.

and recent data from JD Power shows that investor confidence has declined. According to the JD Power US Investor Confidence Index, which tracks investor sentiment among US consumers aged 18 and over with at least $100,000 in investable assets, investor confidence fell 15 points to 581 ( on a 1,000-point scale) in the last quarter of 2022.

One of the main factors contributing to low investor confidence: inflation.

Overall, only 24% said they were very confident in their ability to keep up with inflation, up from 27% in Q3.

So where do we go from here? Well, we asked some investment pros for their advice on what you need to know about investing in today’s market:

Clark Kendall, CFA, AEP®, CFP®, President and CEO of Capital of Kendall

“Apparently, in the immediate aftermath of the regulators’ actions regarding SVB and a couple of other banks, investors panicked and shares of the banks plummeted,” said Kendall. “I think that’s an overreaction. There are opportunities in the financial markets at the moment that include fixed income securities such as US Treasuries, agency and municipal bonds and high quality dividend paying common stocks. stock. Now is the time to take the emotion out of your investing and watch for opportunities to invest in attractive companies whose valuations are likely to become more attractive.”

Collin Plume, CEO of Noble Gold Investments

“The only investors who are not afraid of a bank run are the investors who have a little money in the banks. These are the investors who know the importance of having a hedge, an asset against the movement of traditional assets such as cash and stocks. They realize the importance of investing in assets outside of government control, of investing in assets that have repeatedly performed the best in times of economic distress. This smart investors invest heavily in gold,” Plume said. “It’s sad that many investors only realize the importance of precious metals when everything goes south.”

Milind Mehere, CEO and Co-Founder of Yieldstreet

“Increased market volatility coupled with an increased interest rate regime has led to attractive risk-adjusted returns on private debt investments. These include select Commercial debt opportunities that Real Estate, which is secured by the underlying assets they finance, Art Finance, which are loans collateralized by high quality artwork, in addition to middle market direct lending opportunities, which provide loans secured by the borrower’s assets,” Mehere said. “As the broad reference rate increases, the cost of debt financing increases, leading to higher interest rates for similar or better credit quality borrowers in addition to stronger collateral levels.”

Mina Tadrus, CEO of Tadrus Capital

“Investors should always rethink their investment strategies. The economy is fluid and dynamic and changes quickly, so investments that seemed profitable or safe in the past may no longer be the best. option,” said Tadrus. “Diversifying investments, such as investing in stocks, bonds, and other products, can help reduce risk. In addition, having cash reserves to draw on during economic hardships can also be beneficial. Finally, investors should closely monitor market and economic conditions to ensure that their money is safely invested and managed.

Ron S. Geffner, Partner at Sadis & Goldberg LLP

“Investors should consider where they will keep their assets and how to invest their assets. Retail investors, on average, unfortunately lack the sophistication to understand the risks associated with investing in the financial sector,” said Geffner. “It can also be a further question if the playing field is balanced and if institutional investors benefit not only based on their experience but also their access to information and act quickly on the difference in information and the time to receive this information .”

Protect yourself and your property

While investing always involves some level of risk, there are steps you can take to try to reduce some of that risk if the market starts to experience severe lows.

  1. Diversify your portfolio. Take a good look at your portfolio and make sure you invest in a different mix of properties which is not the same behavior. Spreading your risk across asset types and not putting all your eggs in one basket gives you the best chance of coming out on top, even if the market is more volatile.
  2. Watch the market, but don’t try to time it. Timing the market is a losing game. By reacting quickly to stock market swings, you can create a bigger loss. It is important to know what your investments are, but avoid making any sudden moves and panic-selling your assets. Most experts agree that you stand to gain more by staying the course and eliminating any short-term volatility.
  3. Rethink your investment strategy. Your portfolio mix and investment strategy your risk appetite should be considered. If the stock market slump scares you, this may be an opportunity for you to consider whether your asset mix is ​​truly in line with your risk tolerance and whether you should consider lower risk assets. .

The takeaway

For investors who are at a loss for what to do next and how to navigate today’s market, take a page from our experts’ books. Look for opportunities to invest in higher yielding assets, try not to rely too much on your emotions to manage your portfolio, and you can be sure that what goes up usually comes down, and vice versa.

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