To suggest we are living in extraordinary times would be an understatement. The fact of the matter is that none of us have ever experienced anything like Covid-19 and what is happening around us.
We are facing different and unique challenges and we need to work through them differently.
First and foremost, we need to focus on our health. We need to do everything in our power to maintain focus and stay healthy. This is not a time for panic. At the end of the day, rational thinking will lead us to good choices that should serve us well.
The best strategy to manage investment portfolios is to have a plan that was in place long before a crisis begins. For example, your portfolio should be reviewed at least annually. In years like 2019 that produced exceptional returns, your portfolio should have been reviewed and very likely adjusted given the markets were at all-time highs. If you did that and reduced risk, you would have experienced less volatility during the early panic selling. This would also provide some investors with additional options for rebalancing when markets hit lows.
We put together some ideas and tips to help you deal with the financial impact many are facing during the pandemic:
- Deal rationally with information overload. It would be fair to say, that many of us are dealing with information overload. It seems everyone has an opinion. This can lead to paralysis as you are just not sure who to believe and cannot decide what to do. Alternatively, this can lead to overreaction as you try to do too many things, as each new idea or piece of often conflicting information presents itself.
- Avoid any panic selling. Stick to your financial plan and don’t let everyday fluctuations influence your decisions.
- Continue investing through down markets whenever possible. Purchases made when markets are down, add long term value. Government and company pension plans don’t stop investing in down markets and neither should you.
- Stay current on all your financial commitments. Don’t sign up for government loans or delay mortgage payments unless you really don’t have any other options.
- Manage your credit and credit cards wisely. Avoid interest charges and getting into debt. Control your spending.
- Delay any big purchases that can wait. Don’t confuse wants with needs.
- Resist the urge to get carried away with online shopping. This can be very hard given that almost everything we need is just a click away.
- Don’t make a lot of assumptions that might not happen. The job market will return to normal, etc.
- Understand that events like these almost always lead to recessions. Recessions are perfectly normal and are part of every economic cycle. We shouldn’t forget that we’ve been through many of them in our lifetime. Like all the previous recessions, this one will end one day. None of them last forever. Our actions will play a big role in deciding how we will get through this one.
So if you had a plan, you should have been well positioned for the correction. But the work doesn’t stop there. Once extreme volatility subsides, your portfolio should be reviewed again to look for opportunities to rebalance. This can lead to better risk reduction as well as enhanced performance. It’s important to remember that individual stocks move at a different pace than the overall market and this can create some great opportunities.
With systems like these in place you should find yourself with much less stress and more confidence in challenging times.
If you have a good relationship with your Financial Advisor, follow their advice. If that’s not the case get a second opinion right away. Don’t delay once you’ve decided. Move forward with a plan to get you back on track. It’s never too late to get started.