Is it time to worry? Not with a plan.

“Tactics without strategy is the noise before defeat” — Sun Tzu

The dictionary defines strategy as “a plan of action or policy designed to achieve a major or overall aim.” The term strategy is often used in the context of a business plan, sporting event or throughout history in the context of combat. But we all also have a financial plan. It typically addresses a multitude of factors such as taxes, savings and spending rates and how we desire our estate be administered.

But a very large part of our financial plan revolves around investment planning. This investment plan addresses things such as asset allocation, rebalancing, implementation and risk management. It is usually made in times of market calm and revisited and reassessed periodically as one’s stage in life changes.

One of our core investment tenets is to be resistant to panic and euphoria. It is our experience that decisions made in turbulent times are often emotional and prove to be the wrong move after the fact. A sound and robust investment plan and adherence to that plan is very helpful in avoiding these potential emotional decisions.

The other advantage of a sound financial plan is that it eliminates uncertainty and guess work. Two of the most frequently asked questions in the recent market downturns is, “Should I do anything?” and “When should I do it?” The answer to those two questions is “yes” and “when your plan tells you it is time.”

More specifically, one should be using this opportunity to rebalance if they are outside of their tolerances in terms of asset allocation targets. Rebalancing incents good investor behavior. Buying low and selling high with a disciplined target and tolerance band around one’s asset allocation removes the guesswork of when to rebalance.

We have received many questions about the most desirable market level or price-to-earnings ratio to rebalance or deploy new funds. No one knows where or when the market will bottom out without the benefit of hindsight, and the “earnings” in the price-to-earnings ratio is very much in question currently. Instead, we would advocate rebalancing when there is a 5% deviation from target (or your pre-planned tolerance in your strategy). Then, if the markets shift further, rebalance again.

Adhering to a plan removes the emotion and has proven through multiple market cycles to work. In previous market cycles, many investors have falsely believed “but this time it’s different.” In each case markets have recovered and investors that have adhered to their strategy have benefitted (see table*).

Remember that market drawdowns of this magnitude are not uncommon. We believe that market corrections often create opportunity as markets tend to recover. The market has shown a propensity to produce many of its strongest positive days during bear markets. Missing out on those days can be costly to long-term returns. Timing the market is not a viable strategy. We believe investors should continue to abide by their predetermined strategic asset allocation and rebalancing approaches.


(Peak to Trough)

# of Occurrences


Average Recovery Time (Months)
-5% to -10% 54 0.9
-10% to -20% 21 2.3
-20% to -30% 4 7.9
-30% to -40% 2 10.0
-40% to -50% 2 24.4
-50% or greater 2 38.6

Source: FactSet, Schwab

Through the close of the markets on March 16, the S&P 500 is down approximately 30% from its record high close on February 19, 2020.

© 2020 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

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