By Gary Meeks, RICP®
The coronavirus pandemic has affected Americans and the world in significant ways; social distancing, businesses closing, Americans working at home, many out of work, a run on anything from food to toilet paper and hand sanitizer. Anyone with a 401(1) or money invested in stocks has seen the value of their accounts tank with the S&P 500 index down 30% or more as of this writing on march 18, 2020. What can we learn from this crisis and what if any action should we take as it pertains to our investments? Here are some suggestions.
Don’t Panic:
Making financial decisions based on fear is often a mistake. If you don’t need the money now or in the short term, selling everything now may be a big mistake. Selling now locks in your losses. Then, you have another difficult decision – when do you get back into the market? Often, investors sell low and then buy back when the markets have significantly recovered, compounding the negative affect on their investment returns. Timing the market tops and bottoms is virtually impossible. If you’re a long-term investor, staying the course is likely your best option. This crisis too will pass just like every crisis in the history of this great country and the markets will go back up as they have before.
Re-Access Your Risk Tolerance:
Have you found yourself overwhelmed with anxiety and fear because of the drop in your account value? Do you need this money soon and worried that you will get less back than your original investment? If so, you should re-access your risk tolerance and goals. It is likely you’re not invested appropriately.
I’m not suggesting you sell everything now, but rather determine the risk/return your comfortable with and formulate a strategy to get your money into the right investment products to meet your goals with the level of risk (volatility) that allows you to sleep at night.
Wherever your money is, it has a purpose; it is important to determine what that purpose is and find the right investment vehicle to meet that need.
Long term investor? Buy now!
The market is on sale! It’s 30% off. That’s a pretty good deal, right? For the S&P 500 index to get back up to its high, it must increase approximately 43% or more. That’s a healthy investment return. I believe if you have five years or more before you need the money, now may be a great buying opportunity. Determine an amount you want to get invested while the markets are declining. Let’s say $6,000. I suggest a strategy of incremental buying, example: S&P 500 index is down 20%, invest 1/3 of your cash or $2,000, index declines to 30% down, invest another 1/3 ($2,000) and so on. For most investors mutual funds are a good choice for investing in stocks.
Don’t let fear drive your financial decisions. Take some time to access your financial goals and formulate a plan to be invested in financial products that are appropriate for your age, goals and risk tolerance, and if you’re a long-term investor, consider this a buying opportunity.
For help, find a qualified investment professional to assist you.
Gary D. Meeks, RICP®, is a registered representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker dealer and Registered Investment Adviser. Cetera is under separate ownership from any other named entity. 90 W. 100 N. STE 6, Price, UT 84501 (435)-637-8160.
The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. Investors can not invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing. “The Standard & Poor’s 500 is an unmanaged group of securities considered to be representative of the stock market in general. Past performance does not guarantee future results.”
Mutual Funds and Exchange-traded funds are sold only by prospectus. Please consider the investment objectives, risks, charges and expenses carefully before investing. “The prospectus contains this and other information about the investment company, can be obtained from your financial professional at 435-637-8160. Be sure to read the prospectus carefully before deciding whether to invest.
Important Information:
Index Definitions
S&P 500 Index: The Standard & Poor’s (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization US stocks.