Is Your Financial Advisor Managing Your Money—or Just Watching It?

When the market gets volatile, it's worth asking an important question: What's the actual plan for your investments?

The stock market had a rough week last week.

The Nasdaq dropped 3.37%, the S&P 500 fell 2.68%, and the Dow declined 0.94%.

And if you checked your retirement account, you might have noticed something interesting.

Your investments can lose money remarkably fast.

Nobody calls to ask permission. Nobody sends a warning. You just log in one morning and discover your retirement account has decided to participate in a clearance sale.

Now, market volatility isn't anything new. Markets go up, markets go down, and sometimes they do both before you've finished your morning coffee.

But weeks like this raise an important question:

Is your money being managed according to a strategy you understand, or are you just hoping everything works out?

Let's talk about what that means and why it matters, especially if you're approaching retirement or already enjoying it.

1. Having Investments Isn't the Same as Having an Investment Strategy

Imagine you're taking a road trip across the country.

You've got a nice vehicle, a full tank of gas, and plenty of snacks. You're ready to go.

There's just one problem.

You have absolutely no idea where you're going.

That's essentially what investing without a clear strategy can look like.

You might own some excellent mutual funds, stocks, ETFs, or other investments. But simply owning good investments doesn't automatically mean you have a good plan.

A real investment strategy should answer some important questions:

• What are we trying to accomplish with this money?
• How much risk are we taking to pursue those goals?
• What happens if the market drops 20% or 30%?
• When and how will we need to access this money?
• What adjustments, if any, would we make as circumstances change?

And perhaps most importantly:

Does the strategy we're using today still make sense for where we are in life?

Because the investment strategy that made sense when you were 35 and saving for retirement might not be the same one you want at 65 when you're preparing to live on those savings.

2. Buy and Hold vs. Tactical Management: Two Different Approaches

One thing we believe is important at Both Hands Financial Group is helping people understand how their money is being managed.

There are different philosophies when it comes to investing, and two common approaches are buy-and-hold investing and tactical investment management.

Neither is automatically better than the other. They're simply different approaches, each with advantages and trade-offs.

Buy-and-Hold Investing

Buy-and-hold investing is pretty much what it sounds like.

You purchase investments based on your goals and risk tolerance, and you generally hold them for the long term, even when markets become volatile.

The idea is that markets have historically recovered from downturns and rewarded patient, long-term investors.

This strategy has some real advantages.

It can help investors avoid emotional decisions, reduce unnecessary trading, and stay invested during market recoveries.

And let's face it, sometimes the smartest thing you can do with your investments is leave them alone.

That's also my strategy when assembling furniture. Unfortunately, the instructions usually disagree.

Of course, buy-and-hold investors still need an appropriate asset allocation and periodic rebalancing. It doesn't mean ignoring your portfolio.

The potential downside is that investors must be willing and financially able to experience market declines, sometimes significant ones, while remaining committed to their strategy.

Tactical Investment Management

Tactical investment management takes a different approach.

Instead of maintaining the same investment allocations through every market environment, tactical managers may adjust portfolios based on market trends, economic conditions, risk indicators, or other predefined factors.

For example, a tactical strategy might reduce exposure to certain investments when its indicators suggest increased risk or shift allocations when conditions improve.

The objective may be to manage downside exposure, respond to changing conditions, or pursue opportunities as they develop.

But there's an important distinction.

Tactical management doesn't mean someone can predict what the market will do next.

Nobody has that crystal ball. And if someone tells you they do, I'd suggest asking why they're still working instead of enjoying their private island.

Tactical strategies can get things wrong, too.

They may reduce exposure before markets recover, miss portions of a rally, generate additional trading costs, or underperform a buy-and-hold approach for extended periods.

And they certainly don't eliminate the possibility of losses.

The point isn't that one approach is right and the other is wrong.

The point is that you should understand which approach you're using, why you're using it, and how it fits your financial goals.

3. The Most Important Question Isn't What the Market Will Do Next

After a difficult week in the market, it's natural to wonder:

"Do you think the market is going to keep falling?"

That's a reasonable question.

Unfortunately, nobody knows the answer with certainty.

But there's another question that might be much more valuable:

"What is our plan if the market does keep falling?"

That's where having an investment strategy becomes so important.

If you're 40 years old, contributing to your retirement accounts every month, and don't plan to touch the money for another 25 years, a market decline may look very different to you.

You have time on your side, and lower prices may allow your ongoing contributions to purchase more shares.

But what if you're 67, recently retired, and withdrawing money from your investments every month?

Now the conversation changes.

Because when you're withdrawing money during a market decline, you may be forced to sell investments at lower prices to generate the income you need.

And those withdrawals can make it more difficult for your portfolio to recover.

This is one of the reasons we spend so much time talking about retirement income planning.

It's not just about how much money you have.

It's about how your money is positioned, how much risk you're taking, and where your income will come from when markets aren't cooperating.

Sometimes that means maintaining money in investments designed for long-term growth.

Sometimes it means having a portion of your assets positioned more conservatively.

And sometimes it means considering sources of predictable income so you're not relying entirely on selling investments to pay your bills.

The right combination depends on your individual situation.

4. Three Questions Worth Asking Your Financial Advisor

Whether you're currently working with an investment advisor, managing your own money, or considering hiring someone, here are three questions I believe are worth asking.

Question #1: What is our investment strategy designed to do during a market downturn?

Are we maintaining our allocations? Rebalancing? Making tactical adjustments? Using other risk-management strategies?

There doesn't have to be one particular answer.

But there should be an answer you understand.

Question #2: How much could my portfolio realistically lose?

Nobody can tell you exactly how much an account will decline in the next market downturn.

But your advisor should be able to help you understand your exposure to risk, discuss potential loss scenarios, and explain what those losses could mean for your financial plan.

Because saying you're comfortable with market risk and watching $200,000 disappear from a $1 million portfolio are two very different experiences.

It's a little like saying you enjoy roller coasters until you're actually strapped into one and realize the person operating it looks about 14 years old.

Question #3: Does my current investment strategy still fit my retirement goals?

Life changes.

Your income changes. Your expenses change. Your health changes. Your priorities change.

And eventually, your financial goals may shift from growing your money to protecting what you've accumulated and generating income from it.

Your investment strategy should be reviewed as those circumstances evolve.

5. Don't Wait for a Market Crash to Find Out What Your Plan Is

Here's something worth remembering.

A bad week in the market doesn't necessarily mean you need to change your investments.

Sometimes the best decision is to stay the course.

Other times, a market decline can reveal that your investments aren't aligned with your actual goals or comfort level.

But ideally, you want to discover that before a major downturn, not after.

At Both Hands Financial Group, we believe good financial guidance starts with understanding the person, not just the portfolio.

We want to know what you're working toward, what concerns you, how much risk you're comfortable taking, and what you need your money to accomplish.

From there, we can evaluate different strategies, including buy-and-hold and tactical investment management, to determine what may make sense for your situation.

Because ultimately, the goal isn't to win an argument about which investment philosophy is best.

The goal is to have a strategy that helps you pursue your financial goals—and one you understand well enough to stick with when markets get uncomfortable.

Not Sure What Your Investment Strategy Is Actually Designed to Do?

If last week's market volatility left you wondering whether your investments are positioned appropriately, this might be a good time for a second opinion.

At Both Hands Financial Group, we help individuals and families evaluate their investments, understand their exposure to risk, and develop strategies that align with their retirement goals.

You don't have to move your accounts or make any changes to have a conversation.

We'll start by reviewing where you are today, what you're trying to accomplish, and whether your current strategy is helping you get there.

Schedule Your Investment Strategy Review

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Let's make sure you understand what your money is doing, why it's doing it, and how it fits into your future.

Investment advisory services involve risk, including possible loss of principal. No investment strategy, including tactical management, can guarantee a profit or prevent losses. Past performance does not guarantee future results. This article is intended for educational purposes and is not individualized investment advice.