It’s a bear market on Wall Street, the Texas State Comptroller and others say we are in a recession, and you may be wondering what that means for your investments during the COVID-19 pandemic.
With first-quarter earning reports on their way, you also may be wondering what you can do about your financial investments now.
“Millennials should be focused on the fact that when it comes to investing, they have time on their side and therefore, current market conditions may prove advantageous to the mid- and long-term, diversified investor,” Priya Malani, founder and CEO of Stash Wealth, a financial planning firm, wrote in an email.
A report from Fidelity showed that for most people, the best- performing investment account is their 401(k), Malani said in a March article on Refinery29. Malani said it’s best to “resist the temptation to fiddle with your investments” if you notice your account value going down during the pandemic.
Understanding risk management is important when investing. This week on CNBC, Annamaria Lusardi, a member of the CNBC Invest in You Financial Wellness Council said it matters more now.
“We are in the middle of a pandemic now, and we face an even more uncertain future, and here is when knowledge of risk can be particularly important.”
What sectors should you keep in mind, and where should you put your money?
When it comes to how to outlast the volatile market during the pandemic, Derrick Kinney, an Arlington-based financial advisor, tells his clients in their 20s that although this could be a fantastic buying opportunity, you want to be selective now. Kinney was interviewed on NBC DFW this week.
“One of the most common concerns clients have expressed is asking why is this happening and how long will it last,” Kinney explained in an email. “When entire industries are shut down and employees are in limbo, it can be difficult to predict the future. What started off as a crisis of fear may become a very serious economic crisis.”
While so many stocks are down, remember that not all of them will come back up, he said on TV. Kinney suggests following how consumers spend their money. He asks, where are people spending their money right now? That is where you put your money. In the current social distancing new normal, it’s companies that have a lot to do with technology and telecommuting, he said.
Kinney said that people who have already retired can produce more consistent revenue by looking for “those blue-chip, dividend-paying areas that tend to not fluctuate when the market zigzags like it has done recently.”
Selling stocks or mutual funds is a bad idea at this time.
“Time in the market and not timing the market has helped many investors be successful. While it may be tempting to sell out of something when it is losing value, history shows that it’s often not a wise time to make sudden moves,” he wrote in an email. “Savvy investors that add money when markets are down and when it feels the most uncomfortable, may reap the growth rewards over the next several years.”
For investors with long-term perspectives, gradually adding money to the stock market now may offer growth opportunities, Kinney wrote.
“If you’re already retired, it’s important to understand the level of risk in your portfolio as the stock market will likely be volatile in the short-term.”
Arete Advisors President David Tolson discussed personal finance in the Houston Chronicle this week and said that saving money is ideal right now. When it comes to stocks, if you sell mutual funds or stocks, you are locking in a loss. He said the economy and market will recover in time, but “do not try to time this market.”
What if you just lost your job?
If you are struggling financially or experienced job loss, Tolson suggested cutting expenses as soon as possible and talking to your landlord or lenders as soon as you can.
Tolson warned about avoiding the temptation to withdraw funds from a retirement plan and that the acute short term pain may lead to a chronic problem in the future.
What about real estate?
Across Texas, in-person home showings are down between 38 percent and 44 percent, according to Texas Realtors Chairman Cindi Bulla, the Texas Tribune reported.
With low-interest rates on mortgages, Kinney suggested in an interview with NBC DFW that it would be a great time for many people to refinance, but keep your savings in mind. Use the money you save refinance your home toward your house payment to get it paid off sooner.
Rates are low right now, but Kinney suggested not jumping into just any deal you find. He also said to be selective about your choice of a home. Make sure it’s your dream home so the locked-in rate can be long-term —for more than five years.
Want to learn more about investing?
Fortune published a great article about how to adjust your 401(k) in a bear market.
With limited in-person gatherings at this time, if you’d like to read more about managing your personal finances, consider these books suggested by the Wall Street Journal.