No one expected the longest bull market in history to see its demise brought on by a virus. While U.S. equity markets were able to withstand a trade war with China, a presidential impeachment, the potential for a global recession and global uncertainty including Brexit and civil wars in the Middle East, the U.S. economy was ambushed by a silent and highly contagious virus.
It's almost impossible to remember that in mid-February, equity markets were experiencing all-time, record highs. Now, we are in an unprecedented event-driven bear market. However...there is some good news! Just like springtime always follows winter, market expansions always follow market contractions. So, what can investors do in the meantime to make the most of a down market?
Here are 5 simple strategies to consider:
- LOOK INTO REBALANCING - Maintaining a properly designed and well-diversified portfolio is important. Now is a good time to take a look at your portfolio and consider any rebalancing that may need to be performed. Example: For many investors who had a 60/40% stock to bond portfolio a few months ago, this percentage may have changed over the past few weeks.
- SUSPEND DISTRIBUTIONS -. If you are comfortable with suspending distributions and looking for a potentially better time to take them, please call us at we can see if this strategy works for your personal situation. One important provision to note from the CARES Act is that retirees (70 and older) can forgo taking their Required Minimum Distributions (RMDs) from IRAs or 401(k)-type plans this year for the year 2020.
- THINK RATIONALLY, NOT EMOTIONALLY - One of Sir John Templeton’s “Rule’s for Investment Success” is, “Do not be fearful or negative too often.” Market turbulence should remind us that it is a good idea to re-evaluate instead of panic. Revisiting your current financial situation and evaluating that your risk tolerance, goals and needs are still congruent with your time horizon is a wise plan of action.
Related videos from George: Managing Coronavirus Fear, The Dangers of Emotional Investing
- TUNE OUT MEDIA MAGNIFICATION - It can be difficult to make rational investment decisions when the markets are fluctuating. It can be even harder with the doom-and-gloom headlines that dominate the media. Fear sells, and everywhere you look, the media magnification of the current financial crisis is putting a major emotional strain on most viewers. During these times, it is prudent to resist the temptation of watching news reports and obsessively watching portfolio performance. Sometimes, the more information you have, the more likely you could make a decision that deviates from your long-term strategy. Adhering to a long-term investment plan often requires taking the news with a grain of salt and putting the impromptu advice of others on the back burner.
Related video from George: Finding Value in the Full Story
- SEEK THE HELP OF A PROFESSIONAL - One of our primary goals is to make sure you are comfortable with your investments. Peaks and valleys have always been a part of financial markets. Even if your time horizons are long, you most likely have experienced, and will continue to experience, some short-term movements in your portfolios. Rather than focusing on the turbulence, you will want to make sure you have a diversified investing plan that is focused on your personal goals and timelines. If you are not a current client of ours and would like a second opinion on your current investment strategy, give our office a call at (559) 432-3877 to schedule your complimentary phone call.
The information provided here is for general information only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
All investing involves risk including loss of principal. No strategy assures success or protects against loss.
Past performance is no guarantee of future results.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Please note that rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability