Bach said it’s also helpful to evoke clients’ memories of past market volatility. It’s been about 10 years since the global financial crisis, he noted, so many investors have become focused on the bull market and forget that market fluctuations are normal.
Advisors should be wary of overly bullish clients misreading upward volatility in the market, said Alexander Koury, vice president of investment planning with the Householder Group in Phoenix.
“All of 2017, my clients’ number one question was ‘Why aren’t we buying more into the stock market? It’s going up, shouldn’t we take advantage?’” said Koury, who responded by urging clients to wait for a buying opportunity after a market correction. "Take as little risk as possible for the largest possible returns.’”
Sometimes, the lesson on volatility is best taught through an allegory. John Ten Haagen, founder and principal at Ten Haagen Financial Group in Huntington, N.Y., illustrates market fluctuations with a simple image: a man walking up a gradual hill playing with a yo-yo.
“The media tries to get you to concentrate on the yo-yo going up and down, when you should step back and see a man walking up a gradual hill,” said Ten Haagen.