First and foremost, our concern to you is your physical well-being. As COVID-19 is running its course throughout the globe, we pray for you and your family’s health and safety. We urge everyone to minimize their exposure by avid hand washing and limiting social engagements. Personally, I would love to have a few weeks where I was forced to do nothing but stay at home. Imagine how clean my house would be! Admittedly, it would be so much more appealing if I didn’t also have to entertain a toddler at home.
Recent market volatility has been unsettling to say the least. Every day, it seems like the market makes a large swing…down. It’s not easy to ignore this as we are likely watching the news every hour.
The last few weeks have been painful. But, I want to remind everyone that this too shall pass. We have seen this before. YOU have seen this before. Remember the financial crisis in 2008/2009? The market dropped about 40% in a few months. And yet, it took about a year or two to rebound and we’ve had a strong bull market since. After those challenging times, many of you look back and tell me you wish you had put more in at the time. While we don’t encourage market timing, there are a few ways you can take advantage of this market crisis:
- If there’s money that hasn’t entered the market yet, this is a good time to consider it – as long as it’s not for use in the short term (3-4 years). Remember, we are a financial planning firm, we deal with “long term” planning and definitely do not day trade.
- If you are planning on converting your IRA to your Roth, this is a great time to do so. We typically like to do conversions closer to the end of the year so we have a better idea of your tax bracket. However, this is a prime time to convert. Consider converting an amount less than what you normally do. That way, we can always make up the difference later in the year, but you can still take advantage of the low market now.
- If you are fearful of the market, but don’t want to make any large moves, the best option is to evaluate where you are currently adding to the market. For example, if you are currently contributing to a 401K, maybe lower the risk tolerance of your future contributions. Don’t change the investment allocation of the entire 401K account, but just tweak what your future contributions will be invested in.
- Stay the course. It’s not really a way to take advantage of this market, but it’s definitely a way to not make it worse. Think about why we invested in the first place. Focus your fears on when you actually need the funds you’re investing.
I had a very level-headed client tell me yesterday that she’s “freaking out” and “scared to look at her accounts”. I appreciate the honesty and I’m sure there are many in her shoes. Please know that we are humans too, so we feel you! But history has taught us that this too shall pass. We must focus on thinking with our heads and not our hearts.
Please let me know if you need anything. We are here for you.