Over the last several weeks, the market has become very volatile as the effects of the Covid-19 virus become more widespread. The primary reason that we are seeing significant short-term swings in the market is the uncertainty of how this will affect our health and from an investment standpoint, how this will affect our economy and the companies that we are invested in.
As you are well aware, I have no medical qualifications to talk about the health effects of the virus. However, I believe that many of us will not have to worry about catching it and if we do, we will be able to survive much like most of us would survive a bout with the flu. As the medical experts say, if we are diligent with taking precautions; proper and thorough hand washing, staying away from sick people, limiting our touching of our eyes and nose and mouth - we won't be affected personally by the virus.
Certainly, for all who have investments, we are being affected by the markets and their volatility. Just like the headlines during the Dot Com bust of 2000 through 2002 and the Real Estate and Financial Crisis of fall of '07 to spring of '09, these headlines can be very frightening. At this time, there is no way to know how deep the drop will end up being because of this situation, however I believe that a focus on your individual timeline and goals can help you keep perspective. My belief is that prior to the virus, the economy and the markets were strong. There are certain areas that will take a hit and have a drop in business; airlines, cruises, convention businesses & theme parks. And other areas of the economy might benefit from it; food delivery services, video rental companies and online meeting providers. I believe that 2 or 3 quarters from now the effects of the medical issue will be under control. I believe that in 2 to 3 quarters the effects on the economy will be sorted out, but that does not mean every stock will be at the same level it was at prior to the virus outbreak. All of us control how this affects us by making wise investment decisions and not making emotional ones. If you have several years until you plan on using the money, now is a time to add to your portfolios with a steady consistent stream of purchases like we already do through salary deferral contributions. If you can afford to increase those contributions now would be a great time to buy more shares as the prices become cheaper. Increase from 5% to 6% or 7%, from $100 per week to $125.
If you are currently in retirement and taking income from some or all of your investments, please know that many of those sources of income payments are not directly linked to the stock market. In many cases where money is invested in stocks and income is being taking, we have used guaranteed* lifetime income annuity products. Another major source of income are income-producing bond funds that are designed to provide a steady stream of income regardless of swings in the stock market. If you have concerns about the structure of your income payments, please reach out to us and we will review your current situation.
If you are not sure about how much to have invested in stocks or how much risk is right for you, we have a tool that will help identify your appropriate level of risk. Just reach out to Michelle or Elyse and they will send you an e-mail with a link to a questionnaire that will start the process of identifying your risk score. We are here to help with any questions you may have! I will close with a quote from likely the greatest investor ever, “Be fearful when others are greedy, and be GREEDY when others are fearful!” Warren Buffett!