As COVID-19 begins its slow spread across North America, we’ve seen all kinds of rapid, panic-stricken economic behaviours, from hoarding toilet paper to selling stocks as rapidly as possible. Investors have their finger on the button when it comes to the stock market, causing market volatility that, in turn, causes more reactivity. This is known as a bear market, characterized by plummeting prices and overall pessimism.
But is the situation really all that dire? Or is the cycle of pessimism and falling prices a trap that can be avoided?
In this time of short-term anxiety, it’s more important than ever for investors to know where to get reliable information and how they can take a step back from the news headlines before making potentially life-changing decisions.
In times like this, financial advisors are more aware than ever that every investor is different. This article will tell you what you need to know based on where you are in your investment plan right now. If you want more general information about coronavirus and its impact on the economy and investments, head to our recent article that has updates and opportunities for savvy investors. You can also use this link to schedule a call to discuss your strategy directly with our experienced investment advisors.
Information for New Investors
If you’re under 35 and you just started your investment journey, welcome to the world of investing! You’re probably feeling a bit uncertain as you’re hit with breaking news stories announcing stock market plummets.
As you can already tell, investments are made a little more complex when a major global event like this happens. What you probably don’t know and haven’t heard is this… Things like this happen all the time. On average, you can expect significant market declines at least once per year (although usually not to this extent).
For new investors that haven’t had time a lot of time to contribute yet, losses can feel incredibly painful. When you have 20K invested and you take a 20-30% hit, it doesn’t feel great in the moment. The flip side of that coin is that long-term, disciplined investing pays off in the long-term because your contributions are sizeable percentage of your overall portfolio, thereby average your cost, and buying in at discounts compared to long-term averages.
This is also a time when you should be relying heavily on your financial advisor (and when the cost of an advisor pays off most). It’s great to stay informed, but be sure to do that alongside someone who understands your specific situation and goals.
Information for Mid-Career Investors
If you’re 35-50 and you’ve been in the investment world for a while now, you probably have a more measured outlook on the current situation. You’ve been through some ups and downs before, so you know that as long as you have strong cash flow, advancing your contributions while markets are lower and replacing savings later is a great strategy.
Ultimately this is where the grit of long-term, disciplined plans pay off, and a financial advisor helps people stay on track. It’s also when you can get a lot of extra value from your financial advisor. Be sure to get in touch with your advisor to get more information about how to specifically optimize your portfolio. It’s a good time to check in on your portfolio’s diversification to make sure you’re well placed to ride out market declines.
Information for Pre- and Post-Retirement Investors
If you’re near to retirement or in retirement, this may be a wake up call to the types of strategies that have been employed versus what you need to ensure your retirement is secure. Now is not the time to make sweeping changes; however, it is a great time to revisit your financial plan with a designated advisor who has multiple strategies available, helping you put a strong, defensive plan in place.
Right now, you should be focusing on diversification and employing multiple strategies to protect and preserve your investments for the duration of your retirement. Admittedly, options like GICs and annuities are not the sexiest of strategies, but at times like these, people sleep much better and have greater peace of mind knowing they made the right call in diversifying their retirement income streams.
Diverse Portfolios & Robust Strategies for All Investors
No matter what’s going on in the world, it’s always important to have a financial advisor who can create a fluid, comprehensive plan that’s designed to see you through the ups and downs of the marketplace. Your advisor should be able to offer you multiple strategies that pivot toward all six areas of a financial plan, not just one or two products.
Don’t Fall into the Trap of Comparing Apples to Oranges
Your investment plan was designed specifically for you. Although it can be tempting to give in to the panic that’s rising all around you, keep in mind that your advisor has your best interests at heart. We’re here to protect you in the short-term, but also to help you make good decisions for long-term financial health.