History of USTA League - a 35 Year Success Story

How Tennis Works: Two-Handed Backhand
with Carl Bryan

Keep Calm and Buy Stocks

By Ara Oghoorian, CFA (+ tennis player)

Ara Oghoorian is the president and founder of ACap Asset Management, Inc., a "Fee-Only" financial advisory and investment management firm. Ara can be reached at info@acapam.com, on the web at www.acapam.com, or on the tennis court.

News of recent market volatility alarmed some investors, sending them scrambling to manage loses. But it's time to take a breath and avoid panic. Those with a solid financial plan and a diversified portfolio needn't have worried.

So what is going on? The Dow Jones Industrial Average (Dow) is officially in a correction, which is defined as a 10 percent decline from its peak. The truth is that markets do not always go up, so it is perfectly natural and expected for markets to decline occasionally. In developing and maintaining investment portfolios for our physician clients, we at ACap Asset Management plan for down-markets as well. Not only do we protect against downturns through strategic portfolio design and diversification, but we also capitalize on down days as buying opportunities. Because we at ACap have been expecting this correction for some months now, we have been intentionally accumulating cash in our clients' accounts. We use the cash as an opportunity to buy in a down market. It's like buying stock on sale. Who doesn't like a good sale?

But why did the market take a downturn? While there's really no clear answer to that question, the likely cause is simply consumer panic. As the market slowly declines, many investors panic and sell too, which fuels the fire. Selling your investments in a panic is a bad idea. Those who sell their holdings in an acute down market are often times left in a worse position than they would otherwise have been in if they had held their investments through the market decline and waited for the markets to recover. Markets do recover. And while down markets are never pleasant for investors in the short-term, they are good buying opportunities for the long-term term investor with at least a 5-year holding period. Investing with a shorter timeframe does not always allow for the markets to react and recover to the current world headlines.

So what can you do? As is our philosophy, it is imperative when developing and maintaining your investment portfolio that you always plan for a down market. At ACap Asset Management, we ensure that our clients' portfolios are well balanced and ready for a down-market so they don't have to panic. Not only do we invest for long-term growth, but we also use down days like today as opportunities to buy assets on sale.

Short-term market news should not dictate long-term investment strategy. The biggest long-term risk is not daily volatility, but rather, inflation. Inflation is the declining purchasing power of your cash while it sits uninvested in a bank account. Unless your cash is earmarked for a specific short-term need warranting the need for cash, inflation will have a far more negative impact on your wealth than market volatility. No one can predict the future, but we are confident that the only way to beat inflation in the long-term (5 plus years) is through a well-diversified, equity portfolio.

If you have any questions regarding your accounts or would like to schedule a consultation with us, please do not hesitate to contact us at info@acapam.com