How to manage risk

The last 4 months

2025 started off with the inauguration of a new president, and with it came uncertainty and instability in financial markets. The S&P 500 has been down 4% since the beginning of the year, with the lowest being a whopping 15% on April 8th. Your portfolio has probably mirrored the losses of the market. But what do you do in such times? Should you run for the hills and sell off your positions or try to time the market to cash in big time? If you have a crystal ball, I recommend the latter. If not, then I urge you to continue reading below.

Keep a long-term horizon

A key factor to remember during times of economic uncertainty is that MAJORITY of us physicians are not day traders. We are primary INVESTORS who look for suitable vehicles to invest in and grow our wealth at a respectable rate. Regardless of the political environment and economic uncertainty, if we have the ability, we should continue to be disciplined and continue to invest in our portfolios. A long term horizon is a cushion and hedge against short term instability.

Fire Sale

If you have cash on the sidelines, this is the time to purchase your favourite companies or ETF’s at discounts. For the most part, the fundamentals of the companies within the S&P500 did not change. It’s the macroeconomics that are causing swings in the markets. Think of it as a black Friday event to get high-quality companies at a discounted price. Look at the chart below to give you an idea of your returns if you were able to perfectly time the market last month !

Don’t panic

The worst thing you can probably do in a minor economic downturn is to panic and sell your positions. If you have extenuating circumstances that require you to liquidate your assets for cash, that is a different situation. But panicking and selling when you don’t need to pulls you out of potential positions that would have done just fine had you held on for the ride. During instability, managing your emotions is just as important as managing your assets. As physicians, we can stay pretty level-headed and cool in emergencies, so why not the same with our finances?

A.K, MD