“This time it’s different.” We have heard these are the most dangerous words on Wall Street. Turn on the TV news and you hear about many reasons to run scared and hide. Interest rates are rising, inflation is still with us. The stock market has bad days, weeks and months. World events are scary. Respecting people’s tolerances for risk, is this a good time to buy, at least a little bit?
Years ago, around the time of the Great Recession (or maybe it was the Dot.com Crash) one of the popular speakers who present to advisors made a great point. After the dust settles, how are you going to answer if a client says: “Shouldn’t we have done…something?”
His point ties into another lesson. You should have an opinion about what might happen in the markets. Your firm has plenty of analysts. Rely on them. Ideally you talk about the long term, what things might look like in five or ten years. His point was clients may (or may not) follow the advice you gave when the market was volatile, but they will remember afterwards you had an opinion and offered advice what to do at that moment in time.
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When growth stocks become total return stocks. You have favorite stocks. They have done well over the years. They pay modest dividends because they are growth stocks. The market has knocked some of them down. Your firm has a good research opinion. If prices are down and the dividend is secure, now the yield is higher than it was previously. Is this a good time to add them to the portfolio?
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What is your client’s favorite stock? If they own individual stocks, they likely have at least one. They either bought and held or traded in and out. This client might even have flirted with the idea of “selling everything.” Mention their favorite stock. They will likely say: “I would never sell that!” Why? They will give their reasons for holding it for decades, reasons like good management and great products. What is the price now? Should we add a few more shares?
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Stocks with a history of increasing dividends. Your firm likely publishes a list. These are well managed companies, often with household names that pay a dividend and have been quietly increasing the payout every year or two. Your client’s yield on their initial investment can increase over time if they buy and hold. What names are on that list? Have you talked about these companies lately?
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Do you have a favorite strategy that has been consistently working? There are many stock investment strategies that have withstood the test of time. The Dogs of the Dow and Growth at a Reasonable Price (GARP) are a couple of familiar names. (These are examples, not recommendations.) Clients like strategies used by the pros. Can you take a famous strategy and put it to work on your client’s behalf?
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When collecting becomes investing. Let us assume everything you buy either appreciates or depreciates when you buy it. A good investment might appreciate but a new car depreciates when you drive it away from the dealership. Your client is a collector. If your client collects silver flatware or gold jewelry, they have the value of the underlying metal to consider in addition to the collectable value of the object. Can your client get a good deal on silver flatware out of an estate at their local auction house? It is easy to calculate the scrap value of silver. As of 10/10/22, silver was trading at $18503 with a 52 week low of $16.19. If they are a collector and enjoy the beauty of the objects they buy, can they get a good deal?
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Interest rates will not go up forever. Ever wonder why people didn’t lock in high yields in the early 1980’s? Because some people were convinced rates would go higher. People have been complaining about low interest rates for years. Now they have moved up. Bad news for borrowers, good news for savers. Should your client consider putting some money to work in the bond market?
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Take baby steps. Dollar cost averaging makes sense. It can also be a logical way for reluctant investors to stick a toe in the water. If they invest in quality stocks and they go down, future purchases average their overall cost down. If they somehow managed to catch the bottom (good for them) they bought low and are making money already. How much are they willing to invest that doesn’t represent a big risk on their part but is enough to make a difference if it works out?
Even when things are looking grim, there are good reasons to be buying when others are selling.
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” is available on Amazon.