Lately, it feels like the world has turned on its head. An invisible threat is lurking in our midst, changing the way we work, the way we interact, and what are investments are doing. There is so much uncertainty right now, that it’s hard not to be overwhelmed and feel like things are completely out of control. Here are 3 things you can do right now to stay sane during this crazy market as an investor:
Focus on what you can control
What you must remember is to keep your emotions in check and focus on what you can control. When it comes to investing, most of the time, you should be doing the exact opposite of what you feel like doing. Do you know that Warren Buffett quote “Be greedy when others are fearful and be fearful when others are greedy”? The current market is technically a buying opportunity, everything is “on sale”. Emotionally, it may not feel like a good idea to put more money into a down market. Same thing on the flip side – when the market is doing great, that is the time to trim back your holdings and move more to cash and bonds, which does not feel right either.
The current market is technically a buying opportunity, everything is “on sale”
Look for the opportunities in your current portfolio. Maybe it is a good time to rebalance or maybe you could take advantage of some tax benefits. You can capture losses now to offset future investment gains. Having losses is never the goal, of course, but that is a silver lining of a down market.
It is times like these that we realize the importance of having cash on hand for emergencies. If you are still working, the target for your emergency fund should be at least 3-6 months’ worth of your living expenses. If you are retired, or 1-2 years out from retirement, it is good to have around 18 months-2 years’ worth of cash available. I suggest keeping these funds in a high interest savings account or money market.
Another thing you can control is how you are spending your money. This is a good time to revisit your budget to see where your money is going, make cuts if needed, or reprioritize.
Review your investments in the right context:
You may be thinking, “my equity investments are down 10%, this is awful!” Well, put it in perspective. If then S&P is down 15% and your US large-cap holdings are only down 10%, you are doing really well. Figure out how your investments are performing within their own category. Make sure you are using the right benchmarks for comparison. Most portfolios should be diversified, so some sort of mix of stocks and bonds, and within those, there should be an allocation for large, mid, and small-cap stocks, as well as international and emerging equities.
On the bond side, there are also different flavors that have their own benchmarks to compare against. The problem with talking about the “market” is that the reporters aren’t talking about a diversified portfolio mix – they are usually referring to the U.S. stock market, and usually, just large company stocks, which doesn’t show you the whole picture.
If you take a look at your portfolio, you may find that you’re not that heavily invested in domestic large-cap equities. If that is the case, comparing your whole portfolio to the S&P just doesn’t make sense. For instance, if your portfolio is made up of 25% U.S. Large Cap stocks, then you should compare that piece to the S&P, but not your whole portfolio as the S&P is a measure of just U.S. large-cap stocks.
You want to make sure you are filtering the news properly and not focusing on the wrong thing.
Take Another Look at Your Plan
When you are stressed and overwhelmed, separating reality from all the noise you’re hearing around you is tough. Looking at your comprehensive financial plan will help you get a sense of where you really are and can help eliminate some of that fear and anxiety that is weighing you down.
Review your goals and objectives as these are the real benchmarks for your investment strategy and the reason you’re investing in the first place. Have your goals actually changed due to this COVID crisis? Maybe your focus in the short run has changed, but odds are most of your long-term goals are still the same. Most financial plans are built with the expectation that markets ebb and flow and account for that.
These are uncertain times, but if you can focus on what you can control and make sure that your big picture plan is on track, you’ll be able to weather this storm with a lot more confidence.
Jamie A Bosse, CFP®, RFC, is a Lead Financial Planner at Aspyre Wealth Partners. She helps people Master What’s Next®, no matter what phase of life. Aspyre partners with clients to navigate life transitions. Earlier this summer Jamie was named as one of the 2020 InvestmentNews 40 Under 40 honorees. We are so proud of Jamie and delighted she is on our team, helping clients every day.
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