Q&A with Mike Hemingway from Mascoma Wealth Management - Mascoma Bank

Q&A with Mike Hemingway from Mascoma Wealth Management

author imagePosted by Mascoma Bank on September 2, 2020

Mascoma Bank sat down with Mike Hemingway, Portfolio Manager, to share his thoughts on the current investment landscape.

What is the number one piece of advice that you are giving clients since the pandemic began?

Keep your long-term objectives as your primary focus. Markets can go down 20-30 percent; that can happen every few years. But in the long term, markets historically have an upward trajectory. We never try to time the market. A knee-jerk reaction to get out the market will make long-term goals suffer. As an example, if you were invested in the S&P 500 every day for the last ten years, the average annual return on your investment would be about 8%. Now, if you were out of the market for the best ten individual days during that ten year span, your average annual return would go down by at least a couple of percentage points. Also, oftentimes, after the market has a really down day, it has a very positive day shortly thereafter. So hold steady even when the markets swing over the course of a few days or weeks.

How often should I look at my accounts?

To be honest, you shouldn’t look more than a couple times a month. You may look on a particularly good or bad day and the results may get you excited or anxious. We’re glad that clients are interested in how their portfolios are doing, but we always encourage a more long-term view. That approach is going to be more productive than a day-to-day monitoring.

Interest rates now are at historic lows. How should investors react?

The fixed income markets — bonds, CDs, money markets, etc. — are definitely impacted by the Federal Reserve keeping short-term rates at basically zero. There is not a lot of opportunity for growth right now, but it is a place that keeps your powder dry with less risk than equities. Frankly, the risk that fixed income investments will go down in value right now is pretty small. (As a side note, rates are so low that some money market fund providers are waiving fees so that their investors don’t start getting negative returns.) Some people who would like to earn a higher return are willing to take a lot more risk on things like junk bonds, which come from companies with less than stellar credit and thus might default. At Mascoma Wealth Management, our advice tends to be to avoid those types of investments and keep some funds in more conservative equities that will get a better return between capital appreciation and dividends.