Coronavirus, Oil and Market Volatility
By: Cameron Diehl, CFP®
Friends – The past few weeks have seen some of the most dramatic stock and bond market volatility in recent memory, punctuated by an extreme down day on Monday. To help make sense of it all, I wanted to send a quick update.
First, you can read a new “Thoughts on the Market” piece from our team at Raymond James here. In it, experts from across the firm, including our Investment Strategy, Washington Policy, Healthcare, Energy and Fixed Income teams weigh in on what has happened in markets and what they expect over the near term.
Second, below are a few of my suggestions for investors going through this tough time. If you have any questions about what’s happening in markets or what you should be doing personally, please don’t hesitate to reach out. I’m here to help.
- Stay calm – No matter how bad things get in the markets, making a kneejerk reaction when emotions are running high can be one of the most costly decisions for your long-term financial success. Take a moment to re-focus your long-term perspective, listen to measured, informed opinions and, if necessary, take thoughtful steps within the context of your overall plan.
- Focus on your goals –Sound financial planning should be based around your goals – where you are now, where you are trying to get to and whether you are on track to make it.Your plan should give you complete clarityabout whether you’re on track and rarely should short-term market fluctuations significantly impact that likelihood. If you don’t currently have this level of clarity,working with someone to develop a plan is an important first step in the process.
- Asses your timing –Most of us have a number of both short and long-term goals. And your investments for each should be allocated accordingly.For goals many years down the road, you may be able to afford a bit more riskin your investments when you have time to weather bouts of stock market volatility.For any near term goals, you should favor cash or very stable investments. If your portfolio and timeline are currently out of alignment, you may want to make adjustments to avoid further stress.
- Re-affirm your risk tolerance –Many investors overestimate their comfort level when it comes to market volatility – especially when markets have consistently risen as they have over the past 10+ years. Times like this provide an all-too-real reminder that markets go up and down over time. Your investments should be positioned to help youreach your goals without taking on unnecessary levels of risk.Again, if you feel your portfolio and risk tolerance are out of sync, you may want to consider adjustments.
- Manage cash – Maintaining a cash reserve can provide more than just an emergency fund.Cash on hand can provide comfort during times of volatility and liquidity to take advantage of potential investment opportunitieswhen valuations may become significantly depressed, as they have recently.
- Reassess debt and liquidity – Given the recent plunge in interest rates, borrowing rates have hit historic lows in many cases. This can present an excellent opportunity to reassess your debt and liquidity situation to potentially refinance a home mortgage or consider alternative borrowing opportunities such as a securities-based line of credit to meet cash needs.
- Find opportunities– During times of volatility, there are always opportunities to find silver linings.There are a number of things you may want to consider now suchas completing tax-loss harvesting, increasing contributions to long-term tax-advantaged accounts (401(k)s, IRAs, HSAs, 529s, etc.), strategically rebalancing your portfolio, or considering a Roth conversion, to name a few.
- Seek trusted advice– Stress and emotions can cloud the judgment of even the most level-headed among us.Having an objective source of advice to helpyou navigate times like this can be extremely helpful –even if it’s just to get a second opinion and added reassurance.
The information contained in this material does not purport to be a complete description of the securities, markets, or developments referred to in this material, and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Cameron Diehl, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Rebalancing a non-retirement account could be a taxable event that may increase your tax liability. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
