Message to Investors

Eric Cramer —
Economy, Investing Strategies
The level of volatility in the equity markets over the past ten days has been significant. The uncertainty of the overall impact of the coronavirus weighs heavily on the minds of investors. We have read a number of unhelpful messages from other firms that fall into several categories. Some have boldly predicted this will blow over and the markets should bounce right back.  Some have predicted the worst. Many have tried to have it both ways, saying it could be very bad, or maybe no big deal and were so equivocal that it was hard to tell if they even had an opinion.  And we’ve read the conspiracy theories about COVID-19 that seem designed to provoke fear.

Here Are Some Facts

  • At BIP Wealth we have cautioned for several years about reasons for volatility to jump up and we won’t be surprised if the markets move around even more
  • We have taken profits from the stock market for years for many clients
  • At this point, the selloff is not as bad as the fourth quarter of 2018
  • 2019 was a fantastic year, with the MSCI ACIW IMI Global Equity Index up over 26%

This Market Dynamic Will Impart Different Effects Based on Investor Situation

  • Investors contributing to portfolios and mostly invested in equities can usually afford to tolerate significant volatility; as the market moves up, selling often slows since there is always new cash; however, volatility can prove beneficial over long periods since these investors can purchase at lower prices during dips
  • Investors with a moderate amount of risk can also benefit from volatility; portfolios invested approximately half in equities and half in fixed income will get equal opportunities to buy (on dips) and sell (on peaks)
  • Investors with lower levels of equity risk are enjoying a rally in fixed income; yes, the stock market has declined since its record high on February 12th, but this is the smaller part of these investors’ portfolio; diversification into lower risk securities has helped

BIP Wealth has access to portfolio strategies that other firms do not.  Our Hedged Equity, Hedged Yield, Concentrated Stock, Private Equity (and venture capital), and Private Debt allocations offer additional tools to help investors get through volatile times.  For years we have focused on developing risk mitigation strategies that might not be apparent when the market is going up.  We are confident in our approach.

If you are interested in learning more about BIP Wealth’s many solutions to deal with market volatility, please email us at bipclientcare@bipwealth.com or give us a call at 404.495.5230.
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The Global Equity index is the MSCI ACWI IMI Index, which is a free float-adjusted market capitalization weighted global index selected as the best available proxy for a diversified stock portfolio consistent with modern portfolio theory. Approximately 55% of the index is comprised of the U.S. stock market and 45% is comprised of international stock markets, including both developed and emerging countries. The “Net Total Return” version of the index is reported here, which means the index reinvests dividends after the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.