Since COVID-19 has hit the economy and affected everything from economic outlook to travel bans and social distancing, MSF Consultants is committed to helping clients and members navigate through these uncertain times in the market. It’s natural for individuals to be concerned about their portfolios during times of market distress. However, being concerned and reacting are two completely different things. The market will have its ups and downs, but these key points will help to avoid common pitfalls and stay focused on long term goals.
1.) Don’t put all of your eggs in one basket. Is your retirement account properly diversified? Does the amount of risk assumed in your portfolio match your personal risk tolerance? MSF Consultants can help you review your investment account(s) and provide you with an opinion regarding risk and diversification (investments in different sectors/areas of the markets). It is important to remember, asset allocation and diversification do not guarantee a profit or protect against a loss in a declining market.
2.) Emotional investing can throw your investment account way off course. Don’t do it. If your portfolio has taken a large dip in a short amount of time it doesn’t necessarily mean your investments are underperforming or are not suitable for you. Making emotional decisions and selling out at the bottom could hinder your retirement account for years, if not a lifetime. It is important not only to gauge the amount of risk that your portfolio entails, but to gauge the performance as compared to the broader index.
3.) “Time in the market” is far more important than trying to “time the market”. Accounts that have been in the market for the longest amount of time will usually perform better than an individual investor trying to “time the market perfectly”. Timing the market is like herding cats and can be a dangerous game. Proceed with caution.
4.) Dollar cost averaging can help your portfolio during times of market volatility even though it does not assure a profit or protect against loss in a declining market. Dollar cost averaging means purchasing an investment in equal dollar amounts during different times of the year usually monthly like with a 401K contribution. This helps average out the price paid for the investment(s). Example: In March Mr. Crowley purchases $100.00 of ABC Fund at $100.00 per share (1 share). In April Mr. Crowley purchases 100.00 of ABC fund at 50.00 per share (2 shares). Due to dollar cost averaging all three shares have an average cost of $66.66667. When the market takes large downturns, it can be beneficial for a client participating in Dollar Cost Averaging to continue investing on a regular basis. If affordable, it can also be beneficial to increase the amount contributed each month helping to purchase more shares at a lower price (when the market does go back up, the account may begin to recover at a quicker speed). It is also important to remember that Dollar Cost Averaging also involves continuous investment in securities regardless of fluctuating prices. An investor should always consider his/her ability to continue investing through periods of low price levels.
5.) Lean on your Financial Advisor to put the “Headlines” in to perspective. What does it all mean? One thing to remember is that things are usually not as bad as they may seem. Even though we are bombarded with negativity from a variety of media sources on a minute to minute basis, we have to block out the noise and look at the situation rationally. If you can’t remember anything else from these tips, take a deep breath or three; refer back to Tip #2. Repeat after me, “We don’t do emotional investing.”
While there are many considerations to take in to account regarding investment decisions, the list above is a good start. Regardless of the panic and noise going on around us, we’re here to help. Due to social distancing guidelines, we have opened a Zoom (video conferencing) account for your convenience. Call us today at 478.471.9946 ext. 1503 to schedule your free consultation.
Mark C. Trawick, RFC
Financial Advisor, MidSouth Financial Consultants
1611 Bass Rd. Macon, GA 31210
Office: 478.471.9946 ext. 1503
Email: [email protected]
Securities and Advisory Services offered through GWN Securities, Inc. 11440 N Jog Road, Palm Beach Gardens, FL 33418, 561.472.2700, Member FINRA, SIPC. MidSouth Financial Consultants nor MidSouth Community Federal Credit Union are subsidiaries of nor controlled by GWN Securities, Inc. Not FDIC/NCUA Insured – No Bank/Credit Union Guarantee – May Lose Value