Tips for Keeping Your Investment House in Order in the Time of Coronavirus

Whether working remotely from home or in retirement, many of us have found ourselves with extra time on our hands as the coronavirus pandemic has forced us to avoid a number of activities we engaged in before the lockdown. Extra time can be very good: it can provide opportunities to work on our “books to read” list; to learn a new hobby; to exercise more; maybe even to just devote more time to naps (after all, research proves that regular naps, in addition to good sleep habits, can strengthen your immune system). But it can also be harmful if we use it to dwell on negative thoughts, to worry, or to engage in behaviors that don't improve our lives or those of the people we care about.

Here is a list of quick tips for behaviors to embrace—or to avoid—that can have a positive net effect on your investments, even during the current pandemic.

DO: Stay the course. If you’ve got an investment strategy founded on evidence-based financial principles, stick with it. Low-cost, globally diversified investment portfolios that are structured to maintain an appropriate balance between risks and expected returns offer your best long-term opportunity for financial well-being and peace of mind.

DON’T: Pick stocks or try to time the market. Reliable research demonstrates that market prices continuously reset according to “What’s next?” expectations, while the economy is all about “What’s now?” realities. If you’re trying to keep up with the market’s manic moves, stop doing that. You’re wasting your time and energy, and may be creating more anxiety in your life and with your loved ones.

DO: Take stock of your “rainy-day” fund. Use this time to establish a disciplined process for replenishing or adding to your emergency fund. Set up an “auto-payment” to yourself, such as a monthly direct deposit from your paycheck into your cash reserves.

DON’T: Over-reach for higher yields. Too often, investors succumb to the siren call of “higher yield without risk.” This strategy ignores the overwhelming evidence that risk and expected return are closely related. Stretching for extra yield out of your stable holdings inevitably renders them riskier than intended for their role. Remember the old saying: “Something that sounds too good to be true usually is.”

DO: Rely on evidence-based market research. Create a mix of stock and bond asset classes that makes sense for you; periodically rebalance your prescribed asset allocation to keep it on target; adjust your allocations only if your personal goals have changed; and structure your portfolio for tax efficiency. These principles work, in good markets and bad.

DON’T: Play the market. The Wall Street Journal has reported on young, do-it-yourself investors exhibiting increased interest in opportunistic day-trading and alternatives such as stock options and volatility investing. Evidence suggests you’re better off patiently participating in efficient markets as described above, rather than trying to “beat” them through risky, concentrated bets.

DO: Talk to your financial planner or wealth advisor. Focus on strengthening your own financial well-being rather than fixating on the uncontrollable world around us. To name a few possibilities, we’ve continued to proactively assist clients this year with their portfolio management, retirement planning, tax-planning, stock options, business successions, estate plans and beneficiary designations, insurance coverage, college savings plans, and more.

DON’T: Bail out of the market. This goes back to tip #1, “Stay the Course.” If you’ve planned to augment your retirement income with inflation-busting market returns, the best way to earn them is to stick to your plan. What about getting out until the coast seems clear? Unfortunately, many of the market’s best returns come when we’re least expecting them. This year’s strong rallies amidst gloomy economic news illustrates the point well.

Could you use even more insights on how to effectively invest any extra time you may have these days? Please contact us any time. We’d be delighted to suggest additional best financial practices tailored to your particular circumstances.

Buen Camino!